Preamble

The House met at half-past Two o'clock

PRAYERS

[MADAM SPEAKER in the Chair]

Oral Answers to Questions — AGRICULTURE, FISHERIES AND FOOD

The Minister was asked—

Flood Defences (Edgware)

Mr. Dismore: If he will make a statement on flood defences in the Edgware area. [33751]

The Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food (Mr. Elliot Morley): Although the Department has policy responsibility for flood defence, individual works are designed, constructed and maintained by the operating authorities for each area. The Environment Agency and local councils are jointly considering improvements to defences in the Edgware area.

Mr. Dismore: Is my hon. Friend aware that since the last extensive flooding many people feel that they are living on borrowed time and have sandbags piled high in their back gardens? The floods affected not just Edgware but Burnt Oak and Colindale, and caused substantial damage with consequent distress to my constituents. My constituents are concerned that recent changes to MAFF criteria for approval of schemes may adversely affect them. Before making any final decision on the expected report from the Environment Agency, will my hon. Friend agree to listen to further representations on that study?

Mr. Morley: My hon. Friend has pursued the threats to his constituents with diligence. The Environment Agency is considering a catchment plan for the Silk stream and its tributaries, which is probably the best way of approaching the problem. That proposal has not yet been put to MAFF, so we are not in a position to ascertain whether it meets the criteria. If it does not, stand-alone schemes may be considered to protect the interests of residents. We are always willing to receive representations.

BSE

Mr. Campbell-Savours: What recent developments there have been on the issue of BSE. [33752]

The Minister of Agriculture, Fisheries and Food (Dr. John Cunningham): On 16 March, the Agriculture Council agreed by a convincing majority to lift the beef export ban for certified herds in Northern Ireland. That is

excellent news for our beef industry, and is the first crucial step towards lifting the ban for the United Kingdom as a whole.

Mr. Campbell-Savours: I congratulate my right hon. Friend on his success, but has he seen the most recent claims of Professor Lacey, who alleges that farmers are burying on their land BSE-infected fallen stock? I am having great difficulty understanding how that is possible, given that farmers are being paid between £540 and £680 for each animal that they notify as having BSE. What is actually happening?

Dr. Cunningham: I am grateful to my hon. Friend for his kind remarks about our success in Brussels this week. The United Kingdom Renderers Association wishes to make it clear that no official representative of the association has ever met or discussed any issue with Professor Lacey. My hon. Friend is right that BSE is a notifiable dise, and the burials to which the allegations refer would therefore be an offence. He is also right to point out that, from April this year, if a BSE case is confirmed by post mortem, the farmer will receive £531 and, if it is not confirmed, and the animal has been destroyed, the fanner will receive £663. Given the position of UK farming, I find it difficult to believe that farmers would voluntarily forgo £500 million to £600 million.

Mrs. Spelman: Will the Minister confirm that the Workington site chosen for the new British cattle movement centre had the highest set-up costs of the three sites considered?

Dr. Cunningham: I can confirm that a cost-benefit analysis showed that Workington was the best site for the taxpayer and the industry.

Judy Mallaber: Will my right hon. Friend join me in welcoming the opening of the inquiry into BSE and Creutzfeldt-Jakob syndrome? I attended last week with a bereaved family from my constituency, who were very impressed.
Does my right hon. Friend share my concern about some of the initial evidence given to the inquiry, concerning a supposed culture of secrecy in the Ministry over the period involved, and about the suggestion that at least one vet was asked to change some of his findings? Will he ensure that Ministry officials are encouraged to attend the inquiry, and to give full information about the tragedies surrounding BSE and CJD?

Dr. Cunningham: It would not be appropriate for me to comment on what is happening in the inquiry, but I can say that the culture of secrecy in the Ministry ended on 3 May 1997. I have made it clear to all Ministry officials that they are free to give the inquiry whatever evidence they think appropriate, and that there is no question of any action being taken against them subsequently.

Mr. Charles Kennedy: In view of the significant breakthrough that has been achieved in Northern Ireland—which we all hope will be followed as swiftly as possible by similar progress in respect of England, Wales and Scotland—will the Minister comment on reports leaked from his Department earlier today concerning the


selective cull scheme? Civil servants expressed concern about the effectiveness of traceability, and feared that such reports would send the wrong signal to our European Union counterparts. Can the Minister assure us that everything possible is being done in regard to the remaining 20 per cent. of animals, and that if further action is needed to maintain and build on the momentum at European level, no stone will be left unturned?

Dr. Cunningham: I can give the hon. Gentleman and the House a categorical assurance to that effect. The last Administration, however, were very slow: the selective cull did not begin until January 1997. Because of the delay, it is not surprising that not all the animals that we thought could be identified have been identified. However, because of the age of those animals and the operation of the over-30-months scheme, there have been no consequences to human health. If the animals were not killed, they would have been caught by the over-30-months scheme.

Mr. MacShane: Is my right hon. Friend aware that the borough of Rotherham is about 65 per cent. rural? It is one of the beef-eating and beef-producing centres of Yorkshire, so my constituents are delighted with the news that my right hon. Friend has brought back from Brussels. Does not that news, along with news of the reform of the common agricultural policy—the Commission is adopting a British agenda to force down food prices, which will benefit the British people—contrast with the isolationist, anti-European, xenophobic politics that caused such disaster in our farming communities when implemented by the Conservative Government?

Dr. Cunningham: As my hon. Friend and the hon. Member for Ross, Skye and Inverness, West (Mr. Kennedy) have pointed out, we must press on as quickly as possible with the date-based export scheme for beef producers in the rest of the United Kingdom. I assure the House that we are doing that.
My hon. Friend is also right to remind us that the stupid isolationism of the last Administration, and their obsession with the European Union, left Britain not only without friends in the Agriculture Council but often derided, and greatly damaged the interests of all our farmers.

Mr. Thompson: Does the Minister take pleasure in the fact that the farmers of Northern Ireland greatly appreciate all the work that he and his colleagues have done over the months since he took power to persuade the European market to lift the ban, especially in Northern Ireland?
Some of the provisions that have been agreed mean that there will be extra flagged herds in Northern Ireland. The only long-term solution to that is the date-based system. Will the Minister continue his efforts to ensure that it starts to operate as soon as possible?

Dr. Cunningham: I am grateful to the hon. Gentleman for his thanks and kind remarks. I recognise the significance of agriculture to Northern Ireland's economy and that beef producers in Northern Ireland have had a particularly difficult time. I know that they are delighted by this week's result in Brussels and the emphatic nature of the vote in the Council, which voted by qualified majority to accept the scheme. I accept, however, that it is

imperative that we press ahead and try to achieve similar success for the dated-based export scheme because of the universal nature of that scheme.

Dr. Gibson: Does my right hon. Friend agree that there is still a great need to understand the scientific basis of this disease and its progression: the BSE prion and its mutational properties, its stability in blood and water, its cross-infectivity and the incubation time? Does he agree that scientific funding still needs to be found to understand the full properties of the prion?

Dr. Cunningham: I certainly agree that we need to know much more about BSE and new variant CJD, but I have recently authorised considerable additional expenditure for research of the sort to which my hon. Friend refers. That is an extensive research programme. We have probably the widest-ranging research programme into BSE and its consequences of any country. That programme will continue under this Administration.

Mr. Alasdair Morgan: Following on from his earlier replies, will the Minister give us a candid assessment of the difficulties that he will face in achieving acceptance of a date-based export scheme within the European Union?

Dr. Cunningham: I can foresee some of the difficulties because some of our colleagues in the Council have been reluctant to cast their votes on the basis of the scientific and veterinary advice, opinions and evidence. It is important that we should insist that decisions are taken on the basis of science, not of political or economic advantage. I have already made my views abundantly clear in Brussels and in capitals throughout Europe, and I shall go on doing so.

Sea Defences

Mr. Tyrie: If he will make a statement about resources made available for sea defences. [33753]

Mr. Morley: Allocations for MAFF grants and credit approvals to operating authorities for capital flood and coastal defence works in 1998–99 are at the same levels as plans proposed last year by the previous Government. For future years, the funding level will depend on the outcome of the comprehensive spending review.

Mr. Tyrie: Is the Minister aware that the cost of emergency repairs at Selsey in my constituency is approaching £500,000 and that that money is coming from the Environment Agency budget that was originally earmarked for making more permanent repairs? Is that not a Catch-22 situation, because the more money is spent on emergency repairs, the less is available for making the sea defences permanent? Will the Minister assure my constituents that the Government will make available the resources necessary to bring an end to that absurd situation?

Mr. Morley: I can confirm that, because of the particular problems on the Sussex coast, extra resources have been available in relation to the grant-earning ceiling. That has been raised from the original allocation of £3 million to £3.9 million, which takes into account


the points that the hon. Gentleman makes about the need for emergency repairs and the fact that the cost of permanent repairs has increased.

Beef Export Ban

Mr. Grogan: If he will make a statement on progress towards lifting the beef export ban. [33754]

Dr. John Cunningham: As I have just told the House, on Monday, we secured the first crucial step towards lifting the ban when the Agriculture Council approved the export certified herds scheme by a substantial majority.

Mr. Grogan: Does my right hon. Friend agree that there two lessons to be drawn from the successful meeting on Monday? First, as my hon. Friend the Member for Rotherham (Mr. MacShane)—whose constituency, even if it is 65 per cent. rural, is not as rural as Selby, which is is about 80 per cent. rural—said, if we are to have the ban lifted in England, Scotland and Wales, we need to maintain our constructive attitudes to Europe. Secondly, and more important, in the coming months we need to maintain the strongest possible public health measures.

Dr. Cunningham: My hon. Friend is right on both counts. It is because we have developed an open and constructive dialogue with all the institutions of the European Union—the Commission, the Council and the Parliament—that we have been able to make progress. The progress is due equally to the fact that we have taken stringent measures to safeguard the public and to ensure that our beef is safe to eat.

Mr. Jack: On behalf of Opposition Members, I welcome the announcement on the lifting of the Northern Ireland beef ban. It is a tribute to the foundation work put in place by previous Agriculture Ministers that this Minister has been able to achieve success in Brussels.
May I press the Minister a little further? A moment ago, he announced that he was confident that the date-based scheme offered the key that would unlock the door to the permanent lifting of the ban for the remainder of the United Kingdom. May I have his assurance that that remains the only barrier to lifting the ban? Will he be initiating a discussion at the next Agriculture Council to try to get on the record some form of indicative timetable for the lifting of the ban? Can he tell us when he expects the centre at Workington to be up and running?

Dr. Cunningham: The right hon. Gentleman asked a number of questions. First, I give the right hon. Gentleman at least nine out of 10 for brass neck. The previous Administration made no progress towards the lifting of the ban, which the right hon. Gentleman, the House, the country and, more particularly, our farmers know very well. The right hon. Gentleman is also out of touch with what is happening at the next Agriculture Council. The next Council will be a special Council which I have called to hold the opening discussion and debate on the Agenda 2000 proposals. There is no question of my tabling any indicative timetable at that time. The Council has the special and single purpose of discussing Agenda 2000. If the right hon. Gentleman spent more time and paid more attention

to detail, we might get some sensible questions from him. Finally, we expect the centre at Workington to be operational later this year.

Farm Subsidies

Mr. Eric Clarke: When he last visited the north of England to discuss subsidies to farmers. [33755]

The Minister of State, Ministry of Agriculture, Fisheries and Food (Mr. Jeff Rooker): I visited the region in February when I attended a meeting with the local National Farmers Union.

Mr. Clarke: I thank my hon. Friend for his reply. So much for the Conservatives being the party of the countryside. How can the Conservative party represent the countryside when it has no rural representatives—and no urban representatives, either, come to that—in Scotland or Wales? It is illogical. I assume that my hon. Friend will continue to meet farmers throughout the United Kingdom in order to discuss their problems.

Mr. Rooker: The answer to the question implied in my hon. Friend's comments is that we meet farmers regularly throughout the whole of the United Kingdom. Subsidies to farmers in Scotland—part of which my hon. Friend represents—were £480 million last year, which is an all-time high.

Mr. Jack: Farmers in the north of England will be interested in the recently published proposals for Agenda 2000—and particularly the way in which they affect the dairy sector. Can the Minister tell me whether, at the special Council which his right hon. Friend the Minister will be attending at the end of the month, he will be raising the fact that there is to be a 2 per cent. increase in milk quota, but that, as we have no mountain dairy producers or, at this stage, a newcomers' scheme, Britain will get no increase in milk quota, but will suffer a 15 per cent. reduction in the price of milk? Can the Minister give us an assurance that he will protect Britain's dairy farmers in those discussions?

Mr. Rooker: Yes, the issue will be raised.

Meat and Bonemeal (Disposal)

Ms Drown: What steps his Department is taking (a) to provide for the incineration of more meat and bonemeal and (b) to reduce the need for MBM storage. [33756]

Mr. Rooker: The Government are actively considering a number of major disposal options involving incineration for the meat and bonemeal derived from the over-30-months scheme. Our goal remains to find a disposal solution which takes full account of the need to protect human and environmental health, while keeping the cost to the taxpayer as low as possible.

Ms Drown: I thank the Minister for his reply. My constituents turned out in force last week at a council planning meeting and they were delighted that the council unanimously rejected a plan to store meat and bone meal at an inappropriate site in Wroughton in my constituency.


Will the Minister assure my constituents that MAFF, the intervention board and the Environment Agency will put no pressure on the applicant to appeal against the decision, so that my residents' wishes are respected?

Mr. Rooker: Yes; not only will MAFF not put any pressure on the applicant to make an appeal, but, if the applicant makes an appeal, we will put no pressure on the appellate authorities.

Farm Products

Mr. Hoyle: If he will launch a campaign to promote the safety and quality of British farm products. [33760]

Mr. Rooker: The safety and quality of British foods are second to none. My colleagues and I take every opportunity to publicise that fact, and to stimulate the effective marketing of our products. Promotional campaigns are really a matter for the trade, as they are far more expert at them than are the Government. However, we do what we can to support the various and many trade initiatives.

Mr. Hoyle: I am slightly disappointed by that answer—although it might help a bit if the Minister were to take on board the fact that the oldest agricultural show is staged in my constituency of Chorley. There are many agricultural shows across the country, at which MAFF has exhibitions. What better opportunity could there be to ensure and promote the safety and quality of our good British products? With a little imagination, which I know they have, the Government could raise the profile of safety and quality by promoting them at those shows. Such promotion is all the more important as some people, such as the French, continue to block British beef products but are not sorting out their own house.

Mr. Rooker: I understand and share my hon. Friend's concern. MAFF has travelling exhibitions which visit most of the shows and major exhibitions, such as the food fair that will soon be held in London. We have also sponsored a major British specialities exhibition at the food and drink expo—which I visited on Monday—at the national exhibition centre, in Birmingham. Although we shall continue our exhibitions, it is for the trade to push the matter. Ministers will give what support we can, and we shall visit as many shows as possible—especially targeting shows that Ministers have previously avoided.

Dr. Julian Lewis: How can the Minister justify the continuing ban on sales of beef on the bone in the light of the advice given by his own Ministry to the landlord of the Elm Tree pub in Swanwick that it is perfectly legal for him to cook beef on the bone if he strips it off the bone after it is cooked in the kitchen and before he serves it to his customers? How do the Minister and his colleagues, having introduced the legislation, feel to be the first Labour Ministers since Ramsay Macdonald—who earned the title from Winston Churchill, in 1931—to be boneless wonders?

Mr. Rooker: The hon. Gentleman and most of his colleagues have not quite got the message: the decisions that we took last December have enabled us to start to secure the beginning of the lifting of the beef ban. If what

the hon. Gentleman said about the cooking of beef on the bone is accurate, it is contrary to the regulations. It is an offence to cook beef on the bone. As we have repeatedly made it clear, the danger will be in the juices—[HON. MEMBERS: "Ah!"] Oh, yes; and we will not be the first Government knowingly to put infectivity in the food chain. Fairly soon, Conservative Members will get that message.

Mr. Hanson: Does my hon. Friend accept that farmers and consumers in my constituency realise that one of the best ways of promoting the safety of British food is by establishing the Food Standards Agency? Will he perhaps tell the House how he will promote that agency, so that producers and consumers understand the importance of promoting and improving our food?

Mr. Rooker: Yes. The consultation round on the White Paper "A Force for Change" concluded on Monday, and more than 400 representations were made. We expect to produce draft legislation for the House to consider by the early summer, to produce a Bill for the next parliamentary Session, and to have the agency up and running in the second half of next year.

Mr. Swinney: Once the date-based scheme is secure, will the Minister and the Government consider launching a campaign based on the safety and quality of United Kingdom beef, to ensure that our farmers can reclaim some of the export markets that have undoubtedly been jeopardised by the beef ban of the past two years?

Mr. Rooker: Yes. It would be useful to the House. Recently, Professor Philip James, having been asked about the safety of British beef, said in evidence to the Agriculture Committee:
From my analysis of the BSE issue, I am embarrassed to tell you that…not just myself, but many members of our steering committee"—
the European Commission's scientific steering committee—
believe that meat and meat products from Britain are safer than in most other European countries.

Mr. Soames: Will the hon. Gentleman join me in applauding the work of Food From Britain, which does an extraordinarily good job of promoting British food abroad? Does he agree that farmers need to do more to sell food directly to the consumer? What plans does he have to encourage farmers' markets, which are such a success in the United States of America and could do so much to bring farmers closer to consumers, to the benefit of both?

Mr. Rooker: Question Time is not the time to go into great detail, but when I was at the expo on Monday, I saw the excellent way in which Welsh beef farmers have been marketing pink beef and veal. They never thought of or needed to do such marketing before and they have the full support of my Department.

Farm Incomes

Mr. Garnier: When he will visit Harborough to discuss stock farmers' incomes. [33761]

Dr. John Cunningham: I have no plans to visit Harborough in the near future. However I know that the hon. and learned Gentleman met my hon. Friend the Minister of State on 2 March to discuss farmers' incomes and other issues.

Mr. Garnier: May I begin by thanking the Minister of State for receiving that delegation? It was an extremely helpful and useful meeting. May I draw to his attention the case of one my neighbours, who is a beef farmer? The price of his beef bulls, which were selling at about £720 before March 1996, is now £530. He has not been able to sell any breeding heifers at all, his cull cows have gone down in value from £750 to £300 and the value of his herd, which has increased in number from 257 to 290, has been devalued by £50,000. Will the Minister bear that in mind in his further discussions with the European Commission?

Dr. Cunningham: First, I thank the hon. and learned Gentleman for his kind remarks about my hon. Friend the Minister of State; we are always willing to receive delegations consisting of right hon. and hon. Members and their constituents. I shall certainly bear in mind his example which, sadly, is typical of problems in the beef industry. That is why we are determined to press ahead to seek acceptance for the date-based export scheme to bring further support to the beef sector, in addition to the agrimonetary compensation and the other financial support that we have recently announced.

Mr. Paice: After two Labour Budgets, the average 300-acre family farm, in Harborough and elsewhere, will be £1,300 worse off—and that in a week when the Minister has announced that farm incomes have almost halved. As the Budget did nothing to dampen the strength of sterling, farmers now face the prospect of a further green pound revaluation. Yet the strength of sterling has helped save the Minister some money in his Department's budget. Will he go further than his welcome U-turn on the subject of meat hygiene and cattle passport payments and seek additional ways, within his departmental budget, of relieving the massive burden on British agriculture? He could do that without asking for any further increase in public expenditure, which I know perfectly well he would find it difficult to obtain.

Dr. Cunningham: Both Budgets under the present Government have benefited people in rural as well as urban areas. Only the Conservative party cannot find a single word of praise for my right hon. Friend the Chancellor of the Exchequer following his excellent Budget earlier this week. Like his right hon. Friend the Member for Fylde (Mr. Jack), the hon. Gentleman never lets an opportunity pass without demanding more public expenditure. They say that I should find money from within my existing budget. What do they suggest I should cut to provide that extra money?

Agriculture (West Country)

Mr. David Heath: If he will visit the Royal Bath and West show this year to discuss the current state of agriculture in the west country. [33763]

Mr. Rooker: I am unable to attend the show. I am aware of the current state of agriculture in the west country following a visit by my noble Friend Lord Donoughue to north Devon and Exmoor early in January.

Mr. Heath: I am disappointed that the hon. Gentleman cannot visit the Royal Bath and West. He may recall that the previous Minister was warmly received there. He would be equally warmly received in my constituency. Given the figures released by his Department last week, showing a 35 per cent. decrease in dairy farm incomes and a 65 per cent. decrease in lowland beef and sheep farm incomes, does he accept that his right hon. Friend the Minister was incorrect to tell me last year that there was no crisis in west country agriculture?

Mr. Rooker: I respect the hon. Gentleman's argument and that of his farmers, who have suffered along with others. The extra help that we announced in December and confirmed in February—the cheques will be arriving this month—is going to the upland and less favoured areas. By common consent, that is where the need is greatest.

Mr. Tom King: Agriculture in the west country is in a serious predicament. The most obvious immediate effect of the Budget has been a rapid increase in the value of the pound. What is the Minister's estimate of the likely impact of that on farm incomes in the coming year?

Mr. Rooker: It is too early to say at the moment.

Beef Export Ban

Charlotte Atkins: What progress he is making on lifting the ban on British beef. [33764]

Mr. Love: What progress has been made with the lifting of the beef export ban. [33766]

Mr. Rooker: As my right hon. Friend the Minister said earlier this afternoon, we have made a major breakthrough with the European Council's agreement to the export certified herds scheme. We will be working hard to secure agreement to our proposals for a date-based export scheme, which would apply throughout the UK.

Charlotte Atkins: May I add my congratulations to those of other hon. Members on that? Is it true that only two European countries voted against the partial lifting of the ban? Does that represent progress on the issue with our European neighbours?

Mr. Rooker: My hon. Friend is right—only two voted against. In the Veterinary Committee a few weeks before, four voted against and one abstained. All the recent movement has been towards the position of the British Government.

Mr. Love: Does my hon. Friend agree that, without the strictest possible anti-BSE measures, including a ban on


the sale of beef on the bone, there is no chance of the beef ban being lifted and that, unlike the Conservative party, he will act to protect public health?

Mr. Rooker: My hon. Friend is right. We cannot repeat often enough that without the most rigorous precautions on the safety of the beef food chain we shall not make any further progress and would not have made the progress that we have secured. Unlike the policy that we inherited, that approach seems to be working.

Mr. Ian Bruce: Does the Minister feel that the British Army's buying British beef and British lamb would give people on the continent confidence about accepting our meat? How is he progressing in the efforts that I know he is making with his colleagues in the Ministry of Defence to increase the proportion of British beef, lamb and other meat the Army uses?

Mr. Rooker: The hon. Gentleman makes a fair point. The knowledge that the Ministry of Defence is not sourcing from the United Kingdom raises questions among our competitors and others. We have had discussions with our colleagues in the Ministry of Defence. We expect more British beef to be purchased in future. There is a long-term contract for frozen lamb from New Zealand, which was based on best value for money. I do not know when the contract finishes. We are discussing the issue.

Mr. Bercow: Will the hon. Gentleman confirm that he has not conceded that computer traceability should be the precondition for the lifting of the beef export ban in other parts of the United Kingdom? Will he take this opportunity to confirm his view that there are manual records which are perfectly adequate for the satisfaction of that purpose?

Mr. Rooker: I am grateful for the hon. Gentleman's question. It must not get around that the lifting of the rest of the ban under the date-based scheme depends on a computerised system. The position was different in Northern Ireland for the certified herds scheme because the necessary records were available due to their computer system, which they have had for many years and which had nothing to do with BSE.
The date-based scheme will be secure for cattle born after 1 August 1996. We can guarantee that such cattle will not have been exposed to any contaminated feed. That scheme does not depend on the start of the computerised cattle traceability system, which is a wholly different operation. Although in future the traceability system will help, the lifting of the ban for the rest of the UK under a date-based scheme does not depend on it. If it did, we could not hope to make early progress because, by definition, the date of birth of cattle would be entered only from the summer, and we know that cattle born on 1 August 1996 will be 24 months old by then. We therefore expect early progress on the date-based scheme.

Mrs. Dunwoody: In view of what my hon. Friend has just said, will he say whether there is any hope for English producers who can demonstrate that their herds have been totally BSE-free for some considerable time? Usually because their cattle are pedigree animals, farmers are able to demonstrate that they have had no problems, but they are still unable to export. That seems unfair.

Mr. Rooker: My hon. Friend is right. It is not generally appreciated that the majority of cattle herds in this country have never had a case of BSE. Some 67 per cent. of the 120,000 herds have never had a case of BSE. For beef suckler herds, the situation is more extreme—84 per cent. have never had a case of BSE. That is why the majority of fanners are so angry; they have been affected by what happened to a minority of farmers. We can show that the majority of herds in this country have been BSE-free. Lifting the ban under a date-based scheme, or indeed a certified herd scheme, should be easier, but the myth gets around that every farmer has had loads of BSE cases. That is not true. The 171,000 cases of BSE have been identified on a minority of cattle farms.

Farm Incomes

Mr. Letwin: What estimate he has made of future trends in farm incomes in the United Kingdom. [33767]

Dr. John Cunningham: It is difficult to predict the trend in farm incomes because of the many factors involved. I am kept informed by officials on how specific market developments could impact on farm incomes.

Mr. Letwin: Is the Minister aware that, for many farmers in my constituency, that answer will seem very odd? They have performed their own calculations and believe that they will be out of business next year due to the present state of the pound and the Minister's steadfast refusal to apply for agrimonetary compensation at the level they require.

Dr. Cunningham: The hon. Gentleman is absolutely wrong on that final point. The announcement that I made in December, and confirmed earlier this year, was based on agrimonetary compensation.

Mr. Letwin: It was a small amount.

Dr. Cunningham: The hon. Gentleman clearly does not understand. He says that it was a small amount, but it was virtually all that was available in agrimonetary compensation for the beef sector at that point.

Mr. Bradshaw: Does my right hon. Friend agree that farming incomes are particularly vulnerable to currency fluctuations? Does he therefore welcome the support of the National Farmers Union for the single European currency? Does he agree that it is absolutely ludicrous for the Conservative party to claim to be the friend of the farmer when it is still viscerally opposed to the single European currency?

Dr. Cunningham: My hon. Friend puts it very succinctly, and I agree with him.

Common Agricultural Policy

Mr. Wilkinson: If he discussed the reform of the common agricultural policy with the Minister of Agriculture of Chile during his recent visit to the United Kingdom. [33768]

Dr. John Cunningham: My noble Friend Lord Donoughue met the Chilean Minister of Agriculture on Thursday 5 March. Reform of the common agricultural policy was one of the items that they discussed.

Mr. Wilkinson: I am not surprised at that answer inasmuch as it must seem extraordinarily perverse that the


United Kingdom allows itself to be part of a European Union agricultural policy that deliberately excludes some of the very best and cheapest agricultural produce in the world, such as that from Chile, Argentina, Uruguay and Paraguay. As the European Union's agricultural policy is up for review, could not only the consequences of enlargement but the paramount importance of satisfying the need for British consumers to get the best possible and most economic deal be taken into account?

Dr. Cunningham: I am delighted to agree with the hon. Gentleman; he is absolutely right. We should lose no opportunity to press for reform of the common agricultural policy, because of this country's support for successful enlargement of the Union, because of the impending next round of the World Trade Organisation talks on liberalisation and because, as the hon. Gentleman says, we want to give our consumers the best value for money and the best choice in the food that they buy.

Fishing Industry (Coastal Management Schemes)

Mr. Quinn: What consultations he has had recently with leaders of the fishing industry with regard to coastal management schemes. [33769]

Mr. Morley: I plan to meet leaders of the fishing industry shortly to discuss their recent paper on zonal and coastal state management.

Mr. Quinn: I thank my hon. Friend for that answer and suggest that it would be useful if he could visit fishing communities in Scarborough and Whitby and along the rest of the North Yorkshire coast to receive from them in person the thanks that they have expressed to me for the good start that the Government have made with fishing policy.

Mr. Morley: I am grateful for my hon. Friend's comments. I am always more than willing to meet people from the fishing industry in fishing ports to talk about issues of concern. It is true that we have brought stability to an industry that has lacked it for many years, by getting to grips with the issue of multi-annual guidance programmes III and IV after years of delay.

Oral Answers to Questions — ATTORNEY-GENERAL

The Attorney-General was asked—

International Bribery

Mr. Bayley: What advice he has given the Government on the implementation of the EU and OECD conventions on international bribery. [33782]

The Attorney-General (Mr. John Morris): Officials in the departments for which I am responsible are involved in providing assistance in such matters, but my hon. Friend will know that, by convention, advice given by the Law Officers, and even the fact of its existence, is not disclosed outside Government.

Mr. Bayley: What action are the Government taking during the United Kingdom's presidency of the EU to combat corruption in the public and private sectors?

The Attorney-General: I know of my hon. Friend's strong interest in this matter. Indeed, he introduced a Bill

on the subject in February. The Government have been a strong supporter of measures to penalise corruption. As president, the United Kingdom is taking forward a Luxembourg presidency initiative on corruption in the private sector, which will build on and complement existing EU legislation against corruption of officials. Furthermore, a detailed report being produced by the presidency and the Commission evaluates existing anti-corruption measures in both the first and third pillars.

Mr. Ian Bruce: Will the right hon. and learned Gentleman tell us more about what the Government are trying to do to ensure that our EU partners are not using bribery or other corrupt practices to obtain contracts in other parts of the world? During my visits to other countries, I have heard that Britain often loses out because companies, rightly, are not willing to engage in bribery and corruption with officials in countries such as the former Soviet Union, whereas some other notable large countries in the EU appear only too pleased to do so, to win contracts from Britain.

The Attorney-General: I am sure that my right hon. Friends who will be concerned with such matters in any discussions will seek to do what they can within the European Union to ensure that there is a level playing field. In our domestic law, we can deal only with offences committed within the jurisdiction.

Mr. Skinner: As we are told that Cyprus is trying to join the European Union and will thus be affected to some extent by the Organisation for Economic Co-operation and Development and all the other areas of influence, will my right hon. and learned Friend tell me whether, if discussions take place, the Government will tell the people of Cyprus that we shall bargain to ensure that Asil Nadir is brought back to this country as part of any deal so that he can tell us precisely when he handed the money over to the Tory party and what steps will be taken to give it back to the shareholders who were robbed of it in the first place?

The Attorney-General: I know of my hon. Friend's repeated concern and interest in this matter, which I suspect will not arise during the discussions. I shall take it up with my right hon. Friend the Foreign Secretary.

Crown Prosecution Service

Sir Nicholas Lyell: When he now expects to receive the report of the committee reviewing the work and organisation of the Crown Prosecution Service. [33784]

The Attorney-General: Sir Iain Glidewell has informed me that he will not now be able to finalise his report this month, as he had hoped. Both he and I understand how important it is to the staff of the CPS that it should be completed as quickly as possible. I am satisfied that the review team is proceeding as expeditiously as it can, consistent with thoroughness.

Sir Nicholas Lyell: Pending receipt of the report, will the right hon. and learned Gentleman cast his mind back to when he was in opposition and recall how critical he was of the CPS in relation to discontinuances? Has he noticed his own most recent figures, which show that,


during the months he has had responsibility, they seem to have gone up somewhat? What is more, those discontinued before the first hearing seem to have dropped. Can he given an explanation and assure the House that the CPS has all the backing it needs?

The Attorney-General: I can assure the right hon. and learned Gentleman that the CPS has the backing it needs. This matter comes under the terms of reference of the Glidewell report, and the House would be right to await the report before forming a view. Evidence is required, but the right hon. and learned Gentleman is quite right to draw attention to recent figures.

Mr. Barnes: In North-East Derbyshire, we cannot get the CPS to prosecute motorcyclists, or bodies organising them, who misuse designated bridleways and bridlepaths. Might the review provide some opportunity to allow the CPS to do its work, or might we need a change in the law?

The Attorney-General: I shall draw that matter to the attention of the Director, although these are substantially matters for the police in the first instance.

Mr. Clifton-Brown: If he will make a statement on the review of the Crown Prosecution Service. [33785]

The Attorney-General: I refer the hon. Gentleman to the answer I gave a few moments ago to the right hon. and learned Member for North-East Bedfordshire (Sir N. Lyell).

Mr. Clifton-Brown: Is the Attorney-General aware that the CPS's computer system, SCOPE, had to be abandoned, at a huge loss of public money, because it was unable to cope with the new teamworking practices introduced by the CPS? This means that the CPS is now without any computer system that allows its branches to communicate with each other, let alone with every police force in England and Wales. What will the Attorney-General do to ensure this unsatisfactory situation is resolved?

The Attorney-General: I am aware of the interest and the criticism of the hon. Gentleman, who raised this matter in a Select Committee. I am grateful to him for giving notice of his question. SCOPE is a basic tracking and management system and, where installed, performs those functions adequately. It has been overtaken as the CPS changed and greater demands were made of the system. The CPS is pursuing methods to meet those needs, including consideration of the private finance initiative. I attach importance to compatibility with the remainder of the criminal justice system and I know that the Glidewell review is considering the issue.

Mr. Campbell-Savours: In light of press reports on the Glidewell review, can my right hon. and learned Friend tell the House whether it is proposed to restructure the CPS to 30 or 42 separate areas?

The Attorney-General: I am glad my hon. Friend has raised this matter, because there has been a misconception about it during the past few weeks. We took office with a commitment to restructure the CPS to 42 areas so as to align CPS areas with police force areas. That was the

object of the exercise and it remains the policy. Sir lain Glidewell's terms of reference are clear and require that his recommendations are on the basis of the service being organised into 42 areas.

Mr. Soames: Will the right hon. and learned Gentleman join me in paying tribute to the work of the Crown Prosecution Service in West Sussex, in particular the division run from Horsham, which looks after the magistrates court in Haywards Heath? Does he agree that it does a remarkably good job, despite the fact that it is short staffed and under great pressure? The most important thing that the CPS needs to carry out its task to the best of its ability is a little more money.

The Attorney-General: I understand why the hon. Gentleman presses for more public expenditure, but he knows the remit under which we have decided to operate. I am glad that he has paid tribute to his local staff—a large number of very hard-working and hard-pressed men and women work in the CPS. The Glidewell report is considering the means to ensure that the resources that are available are used to the best advantage and that lawyers get on with prosecuting and managers get on with managing, so that there is not the current undue mix.

Mr. Bermingham: Will my right hon. and learned Friend confirm that the Glidewell report will thoroughly review the working relationships between the police and the Crown Prosecution Service?

The Attorney-General: Yes. My hon. Friend raises an important issue. Concern that the relationship was not as smooth as it could be was a big factor in our decision to set up the review and to align police and CPS areas. It is also a specific topic in the review's terms of reference. The House will be aware that a very experienced former chief constable and inspector of constabularies, Sir Geoffrey Dear, is one of the team of three, which includes, of course, Sir lain as chairman.

Fraud Trials

Mr. Lock: What representations he has received on the use of juries in fraud trials. [33786]

The Attorney-General: Last month, my right hon. Friend the Home Secretary launched a consultation exercise seeking views on whether an alternative method of trial should be available in serious and complex fraud cases and on the viability of various options for change. I have not received any representations following the launch of the consultation exercise.

Mr. Lock: I am grateful to my right hon. and learned Friend for that answer. Does he share my surprise that those who present fraud trials in an extended and lucrative way have taken no steps to preserve the current system? Does he also agree that Britain's reputation as a place for international financial business depends on effective and thorough mechanisms to combat fraud? What further steps do the Government propose to take to combat financial fraud?

The Attorney-General: In his consultation exercise, my right hon. Friend the Home Secretary is examining


the effectiveness of current trial management procedures. Moreover, the Government intend to widen the gateways to allow for the flow of information between all relevant agencies in the fight against fraud. We are also considering a system of civil fines for behaviour that, although not criminal, nevertheless tarnishes the market's reputation. The Government also recognise that an effective system of regulation is necessary to complement the criminal justice system, so a new single financial regulator, the Financial Services Authority, has been set up to help secure the United Kingdom's place as a fair, safe and clean place in which to do financial services business.

Mr. Burnett: Does the Attorney-General agree that juries should set and decide on standards for honesty in fraud as well as other trials?

The Attorney-General: My right hon. Friend the Home Secretary has set out various options. The Government recognise that there are concerns that the current system for handling some major, complex fraud trials is not working satisfactorily and that there may be a case for considering some change to the system, but we have not yet reached a conclusion on whether the ending of jury trials in serious fraud cases is desirable in principle. Moreover, we have not yet formed an opinion on any particular option for change and will not do so until the consultation procedure is complete.

Mr. Blunt: Is the right hon. and learned Gentleman aware of any fundamental objection to a system of specialist jurors with financial qualifications, and who have time available to sit, as the solution to that problem?

The Attorney-General: I am sure that the hon. Gentleman will want to read the Home Secretary's White Paper and look at the options there canvassed. As I said in my first answer, I have not received any

representations. That is one of the suggestions that could be canvassed; I invite the hon. Gentleman to make his representations to the Home Secretary.

Oral Answers to Questions — AGRICULTURE, FISHERIES AND FOOD

The Minister was asked—

Red Meat

Mr. Spring: If he will make a statement on the impact on the livestock industry of the Committee on Medical Aspects of Food and Nutrition Policy's recommendations on red meat consumption. [33771]

Mr. Rooker: We have no way of measuring the exact impact on the livestock industry of recommendations made by the Committee on Medical Aspects of Food and Nutrition Policy in its recent report on the relationship between diet and cancer. For the avoidance of doubt, I remind the House that all the work on that report was completed before the Government came to power.

Mr. Spring: Does the hon. Gentleman realise how demoralising all this is for beef farmers and, indeed, how confusing it is for consumers? I do not want to make any party-political point, but does he accept that constant change in what is supposedly safe and what we can or cannot eat is very undermining and reduces significantly the credibility of Government spokesmen?

Mr. Rooker: The hon. Gentleman's remarks are based on many of the myths and press reports surrounding the publication of the report. The fact of the matter is that COMA' s recommendations about reducing the consumption of red and processed meat apply only to above average consumers, especially those who consume very high quantities of red and processed meat. The recommendations do not apply to the vast generality of the British public who eat red meat.

Schools Funding

The Secretary of State for Education and Employment (Mr. David Blunkett): With permission, Madam Speaker, I wish to make a statement. Tuesday's Budget has rightly been well received. It confirmed new Labour's reputation for economic competence. It was a Budget for enterprise, a Budget for work and a Budget for families and for education.
The Chancellor pledged an extra £250 million for schools and skills in the coming financial year. Let me remind the House that that increase is part of the £2.5 billion boost for education and skills that we have already earmarked in the 10 months since we were elected last May. We inherited a situation in which, between 1993 and 1996, the Conservative party had cut £110 in real terms from every secondary pupil in the country and £44 from every primary pupil. Already, we have made a substantial start to repair the damage of those Tory years of neglect, by providing an extra £110 for every pupil in the coming financial year. We have increased the standards fund to more than £500 million in 1998–99, which includes an extra £59 million to improve literacy standards.
Today, I want to detail the big difference that this week's Budget will make, in increasing the means available to improve our schools and their pupils, by outlining four further major steps that we intend to take. First, I can make this pledge. We will bring to an end the scandal whereby children in 600 of our schools, most of them primary, still have to go outside to use the toilet. Tens of thousands of children have to go outside to use facilities that often date back to the Victorian age. That is simply unacceptable in the last years of the 20th century. We are inviting the authorities affected to apply for a share of the extra £35 million that we are earmarking, so that they can provide the decent facilities that every modern school should have. By next year, we shall have ended the scandal of outside toilets for ever. That will take our schools from the Victorian age into the age of the new millennium.
Secondly, I am concerned at the number of schools that have inefficient boilers and heating systems, which often break down. They waste energy and leave thousands of children spending the winter days in cold and draughty classrooms. We shall provide an extra £15 million to allow up to 500 schools to replace or improve their inefficient heating systems.
That will make classrooms more comfortable and learning-friendly places, save a great deal of money and put a stop to the waste of energy and damage to the environment, with a reduction in carbon dioxide emissions. As many as 100,000 children will have, at long last, the working conditions that they should be able to take for granted in a civilised society.
Thirdly, we have already announced the first £22 million to provide the extra teachers to ensure that we make an immediate start on our class size pledge, so that by 2001 every five, six and seven-year-old will be in a class of 30 or fewer. That first tranche will mean that 100,000 infants will benefit from this September.
When we announced that funding, redirected from the phasing out of the assisted places scheme, we made it clear that there would be extra money to build extra

classrooms where they were needed. Today, I can announce that an extra £40 million from the Budget will be targeted specifically on providing those extra facilities in 1998–99. That will help us to deliver our core pledge on class sizes, which will help us to meet our demanding literacy and numeracy targets.
Those three capital spending measures will be in addition to the £250 million from the new deal for schools to be allocated in 1998–99 and to the £800 million that local education authorities and schools are spending in the normal way on repairs and maintenance this year.
There is a fourth piece of good news on schools from the Budget. I can further confirm that we shall expand rapidly our education action zones programme. We shall fund a fivefold increase to establish 25 zones by January 1999. We have already had considerable interest from imaginative partnerships between schools, LEAs and business at local level.
The zones offer extra flexibility to help schools in challenging circumstances to meet demanding targets and to make significant improvements in standards and expectations. By making a substantial expansion in the coming year, I am confident that we shall be able to extend the programme yet further in this Parliament.
This is a coherent programme that will help the process of transforming schools for the future. It means no more children having to go outside to use the toilet; improvements in the heating of schools; substantial further progress towards meeting our class size pledge; and a big boost to our flagship programme of education action zones.
In the years ahead, we shall meet our manifesto commitment to increase the proportion of national income spent on education. We are making a substantial start in the year ahead. By doing so, we are transforming the life chances of millions of children. We are modernising the fabric of our schools and making real progress in raising standards for all our children.
This is a new Labour Budget; a Budget for a modern Britain in a new century; a Budget to turn ambition into achievement.

Mr. Stephen Dorrell: It would be churlish not to welcome extra money to be spent on education, and I am pleased to welcome the Chancellor's announcement of extra spending on schools—

Mr. Blunkett: But.

Mr. Dorrell: There is indeed a but. As the Chancellor went to considerable trouble on Tuesday to obscure precisely how much extra he intended should be spent on schools, can the Secretary of State confirm that the total of new money to be spent on schools in England that he has announced today is a £90 million capital programme, to be spent on the no doubt desirable objectives—certainly, they are desirable—of ending outside lavatories, modernising heating and building extra classrooms to accommodate the expansion required by the Government's class size pledge? Can the Secretary of State confirm that, when the Chancellor announced on


Tuesday £250 million for education, he was misleading the House and that the Secretary of State has set out this afternoon the reality—

Madam Speaker: Order. Did I hear the right hon. Member for Charnwood (Mr. Dorrell) accuse another right hon. Gentleman of misleading the House? I am sure that he will apologise.

Mr. Dorrell: Inadvertently misleading the House, Madam Speaker. Has not the Secretary of State made clear this afternoon that the quantum of the Government's commitment, following the Budget, is £90 million in new money for schools? That is my first question.
Secondly, will the Secretary of State clarify exactly the status of the new deal for schools? He said in his statement that the capital plans are in addition to the £250 million from the new deal for schools allocated for 1998–99. However, the Red Book from last year's July Budget says that, in 1998–99, the new deal for schools should be £300 million. Will the Secretary of State confirm whether the new deal for schools in 1998–99 is £300 million, as announced last July, or £250 million, as set out in his statement this afternoon?
Thirdly, will the Secretary of State confirm to the House that he is now acknowledging that the Government were always wrong in saying that they could meet the cost of their class size pledge from the savings arising from the abolition of the assisted places scheme? Nobody except Ministers believed that that was possible. The Secretary of State announced this afternoon that the cost of meeting the class size pledge next year will be £22 million—as the Minister for School Standards announced to the Standing Committee on the School Standards and Framework Bill earlier this year. I should be grateful if the Secretary of State confirmed that the Government now recognise that they cannot meet their class size pledge using the savings from the assisted places scheme.
Fourthly, I should like to ask the Secretary of State about education action zones. The Conservatives have, broadly speaking, welcomed those ideas as they have been discussed in Committee. Will the Secretary of State confirm that the purpose is to provide opportunities for private sector firms to offer an alternative to local education authority-managed schools? That is certainly what the Secretary of State's adviser, Professor Barber, announced to the north of England education conference earlier this year—indeed, he said that it made it possible for Procter and Gamble to run schools. Is that the Secretary of State's policy, or was it a bit of private enterprise on the part of Professor Barber? I shall be interested to hear the Secretary of State's response.
Finally, will the Secretary of State confirm that the £90 million in new money that he has set out to the House this afternoon represents roughly half a per cent. of school spending? Will he confirm that it makes no difference at all to the pressures being experienced in schools up and down the country? Reports are coming in, day by day, from Wiltshire, Oxfordshire, Somerset, Suffolk and many other counties about schools that are facing severe resource constraints.
Is it not the case that the Government will enter their second year in office with many schools facing cuts and many teachers worried about their jobs? Is not the substance of what the Secretary of State hails as a new

Labour Budget that the Government's priorities are not, as the Prime Minister likes to claim, education, education, education but in fact presentation, presentation, presentation?

Mr. Blunkett: The right hon. Gentleman has confirmed more vividly than I could the importance of the extra £835 million allocation to our schools as a result of the July announcement. He confirmed how crucial it is that education in England will receive £250 million more in the coming year through the new deal and that we shall manage to provide 1,500 more teachers from this September in order to fulfil our class size pledge. Those measures are in addition to the miserable £182 million that the previous Government allocated for education in the coming year.
I shall certainly answer the right hon. Gentleman's questions. There is £250 million for education in skills, which is what I said in my statement to the House this afternoon. A proportion of that goes to England, Scotland and Wales, which answers the right hon. Gentleman's second question. Wales, Scotland and Ireland get a proportion of the £300 million for the new deal. I am making a statement, as is the usual convention in the House, about England, because that is where I have responsibility for education.
Let me spell it out. There will be £250 million for the new deal for the coming year, and an extra £250 million across the UK for education in skills in the coming year, £90 million of which I have announced today.
The right hon. Gentleman asked about the class size pledge. We made it clear that the phasing out of the assisted places scheme would slow down implementation of the class size pledge. My right hon. Friend the Chancellor has helpfully allocated an extra £40 million in the coming year to accelerate the implementation of the class size pledge—for preparing, planning and ensuring that the design of extra facilities, the expansion of a classroom or the alteration of a building can take place in the months ahead, so that we can do even better in 1999 than we originally envisaged.
I was not sure whether the right hon. Gentleman was welcoming or criticising the measure. Is he in favour of the class size pledge or against it? Does he want smaller classes, or is he against them? Is it just sheer disappointment that has provoked him this afternoon to make what sounded like a griping, critical statement about £40 million more for schools throughout the country? If one was generous, that could be described only as extremely churlish, and the right hon. Gentleman was very churlish.
In reply to the right hon. Gentleman's fourth question, schools manage schools and will continue to do so, LEAs will continue to give their support and others will give their enterprise and initiative where it is appropriate as part of a partnership. I hope that Conservatives will welcome, encourage and support the development of education action zones, which will bring new initiatives in areas that need them most.
There will not be an authority from inner London, Essex or Derbyshire, or from the south-west of England, which will not today rejoice that they will at last be able to do what they have yearned to do for years, and what parents and children have wanted, which is, after 18 years of Conservative government, to eliminate the


600 remaining outside toilets in Britain's schools, so that we can have a civilised nation in the build-up to a new century—the end of the 19th century as we move to the 21st century.

Mr. David Drew: I roundly welcome my right hon. Friend's statement. It may be too early to put out the flags for the schools with outside toilets, but if he would like to come to my constituency and cut the ribbons when they have all gone inside, I am sure that the heads will be only too delighted to welcome him.

Mr. Blunkett: I should be delighted to come to Stroud to celebrate, and even to use the new facilities; to declare new Britain, new loos.

Mr. Phil Willis: We are disappointed that the Secretary of State's statement was widely leaked to the media well before we heard it today. After the debacle of the Secretary of State for Health yesterday, we were assured that that would never occur again. Yet when we did the media rounds at lunchtime today, every media outlet had the full statement.

Mr. Tony McNulty: Flush out the leakers.

Mr. Willis: We must flush out the leakers. That is a most appropriate comment.
Liberal Democrats welcome any new spending on education and, although £90 million is not as much as we would have liked, it is still extremely welcome. The £35 million to eliminate outside toilets is particularly welcome because, in this day and age, outside toilets raise the important issue of child safety. However, we are surprised at the speed at which the right hon. Gentleman has been able to move, because on 3 March my hon. Friend the Member for Bath (Mr. Foster) was told that the Secretary of State did not know how many schools had outside toilets. We also welcome the £15 million to be spent on heating. It is important that our children and our teachers have quality facilities in which to work. However, we are disappointed that, again, there is a bidding system for both those sums. It does not seem appropriate that we have a new, trusting arrangement with local education authorities only to bypass them and go into the schools the first time that money is available.
We welcome the extension of education action zones—we have always supported that proposal—but ask the Secretary of State to ensure that there are a number of rural action zones, and that the preponderance of education action zones is not concentrated on the inner cities.
We are hugely disappointed that the whole area of lifelong learning is neglected and that there are no additional resources to meet the pledge that the Secretary of State made in "The Learning Age", or the pledges that have been made in response to the Dearing and Kennedy reports. Sixty per cent. of further education colleges face deficits, and more will be technically insolvent this year. When will this Cinderella sector be given the resources that it needs, to tackle the bridgehead between schools and universities?

Mr. Blunkett: I look forward to the day when the Liberal Democrats whole-heartedly welcome anything,

because lifting the morale and motivation of the teaching profession is all about not griping and being cynical about every move that is made. I reassure the House that the media did not have my statement at lunchtime; I was still revising it. Secondly, I took the trouble of not going on the "Today" programme, which is unheard of in terms of Government presentations—I say to the Leader of the House that I am only joking.
Let me deal with the last point head on. This is not a statement about lifelong learning. There are resources for skills and lifelong learning, which will be announced separately. We have already allocated £100 million to further education and £165 million to higher education over and above what was allocated by the previous Government. It is simply not true that resources are not available to implement the proposals in "The Learning Age". The comprehensive spending review will deal with that.
There will have to be a bidding process to ensure that we target the money at schools that are in greatest need: first, to replace outside toilets—and that means all outside toilets, wherever they are—and, secondly, to replace the heating systems that are in most need of immediate action. I can assure the hon. Gentleman that education action zones will be available in rural areas, and we look forward very much to evaluating the bids from counties that believe that this initiative will help them to raise standards.

Madam Speaker: After the intervention made by the hon. Member for Harrogate and Knaresborough (Mr. Willis), perhaps we can have questions.

Mr. Peter L. Pike: I welcome my right hon. Friend's statement. Is not it a fact that, for 18 years, we had a Government who did nothing to tackle the problem of our decaying schools and often refused to recognise that poor school facilities, such as toilets, boilers and so on, have an effect on learning in schools? We now have a Government who are prepared to put money into those areas, and who will, over the next five years, show that we mean business as far as education, education, education is concerned.

Mr. Blunkett: I am grateful to my hon. Friend. The means to ensure a transformation in the life chances of youngsters who have had to put up with intolerable conditions in the past will bring great comfort to people in Burnley.

Mrs. Jacqui Lait: Will the right hon. Gentleman please tell me how many London boroughs surrounding the borough of Bromley will become education action zones; and when does he expect their standard of education to improve to the standard in Bromley? Bromley parents will then be able to use the places in their schools that are currently taken up by the 25 per cent. of out-of-borough pupils. Those pupils are very welcome, because they get a decent standard of education, but it should be provided in their own Labour-controlled borough.

Mr. Blunkett: On the first question, the bids for education action zones are completed and will be with the Department tomorrow. When we are able to evaluate them, we shall announce where the action zones will he placed.
On the second question, the hon. Lady has raised this issue before. I give her the same reply that I gave before. It is a scandal that children cannot get into Bromley schools because of the selective system, even though they may live just round the corner. It may be good for people in other areas to travel to take up places in Bromley schools, but it is no joke for those who have to travel miles from Bromley because they are pushed out by children coming in from elsewhere.

Kali Mountford: I am flushed with pleasure at my right hon. Friend's statement. Before the election, Conservative Members did not think that class sizes mattered, but now they do. Is it not churlish of them not to welcome the statement whole-heartedly, given that children often lose days of education because of broken boilers? Is it not better that we invest in their classrooms rather than have them huddle together for warmth?

Mr. Blunkett: Yes, it certainly is. I welcome what my hon. Friend says, and echo what my right hon. Friend the Secretary of State for Health said yesterday: the money for the health service will ensure that we are prepared, even if we are hit by the meteorite. I am preparing children to be able to get somewhere quickly should they learn that the meteorite is coming.

Mr. Nick St. Aubyn: With the cry, "New Labour, new loos", the Secretary of State confirmed our fear that the future of education will go down the drain under the Government. Is it not bound to be noticed that the most welcome improvements of facilities at the 600 schools that he mentioned will cost £35 million, which amounts to £60,000 per school? Why is the Secretary of State inviting local education authorities to spend the money, and not enabling schools directly to get their hands on it so that it could be spent more efficiently and more carefully?

Mr. Blunkett: That takes the biscuit. We shall be replacing toilets, putting boilers into schools and replacing heating systems through the most administratively efficient mechanism possible. When LEAs are responsible for capital investment for schools under their auspices, it is sensible that they carry out improvements. We shall not advertise across the country for schools to declare themselves; we must move swiftly. We want bids to be in by 30 April, so that we can ensure that the scandal of children going across the yard and around the corner in the wet to spend a penny does not continue into the winter months.

Ms Margaret Hodge: I congratulate my right hon. Friend on his statement. Does he not agree that the Opposition education spokesperson should not deliberately muddle, if not inadvertently mislead, the House by pretending that the money is not new? Would not it be better if the Opposition apologised for spending 18 years failing to address the basic issue of installing inside lavatories in our schools? Many good Labour-controlled local education authorities have spent the past 18 years trying to provide inside toilets, and they would welcome being given some of the resources to improve their heating systems. Will my right hon. Friend confirm that they will not be disadvantaged when he determines how the money will be spread?

Mr. Blunkett: We shall distribute the money on the basis of need. As with the new deal for schools, we shall

ensure that it is applied to assist in overcoming the legacy that we have inherited, and to assist us with the standards fund. I welcome my hon. Friend's opening words: we are at the end of an era, and at the beginning of a new one. I had hoped that the Opposition would welcome that. With regard to the remarks of the shadow Secretary of State, we are working hard to get the numeracy schools off the ground as fast as we can.

Mr. Edward Leigh: What is the increase in education funding for Lincolnshire in the first year of Labour government compared with those in the last two years of Conservative government? If, as I suspect, the difference is modest, would it not have been more honest if my Labour opponent at the general election, instead of saying, "Education, education, education" had said, "Same old problems, same old problems, same old problems; same old increase as the Tories every year, same old increase as the Tories every year, same old increase as the Tories every year"?

Mr. Blunkett: I do not think that schools in Lincolnshire that have £1,000 extra to spend on books before 31 March would say, "Same old expenditure, same old Government." When they are given their allocation from the new deal for schools programme next year, they will not say that it is the same old story. As I announced in my statement, schools will receive, on average, £110 more for each pupil next year than they would have received under the Tories.

Mr. Dennis Skinner: Is my right hon. Friend aware that the parents of the kids in those 600 schools, many of which are in rural and semi-rural areas, will not care whether it is old or new money? They will not get terribly excited about whether it is in the Red Book, the Blue Book or the Green Book. They will know that this is real money. Those 600 schools need sorting out: the Tories had 18 years in which to do it. This work will be done before the end of the century, and those parents and kids will be better off as a result of the action announced today.

Mr. Blunkett: If every hon. Member showed such spirit, we would make enormous progress in giving the children of this country the life chances that they deserve.

Mr. Edward Garnier: May I draw to the Secretary of State's attention the case of Fairfield Road primary school in Market Harborough? It has already put in a bid under the new deal for schools. Will the boiler money that he has just announced be in addition? The school has three separate boilers and three different fuel systems, and it would obviously be sensible to have one boiler system and one fuel system.

Mr. Blunkett: I am aware that the hon. and learned Gentleman has written about that matter. The money that I have announced will be additional to the bids under the new deal for schools.

Fiona Mactaggart: I greatly welcome the Secretary of State' s statement. Does he agree that 20 years of under-investment in education, of children peeing in disgusting lavatories, and of freezing classrooms often in huts that contain asbestos has given the message that


education does not matter, which it did not under the previous Government? Will he consider following up this excellent scheme with a programme to get rid of the use of huts, many of which leak and contain asbestos? Will he also ensure that education action zone proposals can be made in future? This year, Slough is becoming a unitary authority and a local education authority for the first time. That is not an appropriate time to make a sensible proposal for the creation of an education action zone. Will he give me an assurance that the programme will be available to such authorities in the future?

Mr. Blunkett: Health and safety is one of our key priorities under the new deal. The replacement of asbestos and the removal of what are no longer temporary classrooms, because many of them are more than 40 years old, will be part of that programme. Moreover, I can give my hon. Friend the assurance that she seeks. Subject to the outcome of the comprehensive review, I hope to expand the education action zone programme during this Parliament.

Mr. Tony Baldry: No doubt the right hon. Member for Oxford, East (Mr. Smith) will have explained to the Secretary of State that Oxfordshire this year faces a £3.5 million deficit on its education budget, which is leading to reductions in school budgets. Is the Secretary of State aware of the feeling in shire counties such as Oxfordshire that they are losing out on the standard spending assessment system, and that they will not benefit from initiatives such as the one that has been announced this afternoon, however welcome they may be? I do not expect the Secretary of State to answer now, but it would be helpful if he would write and explain how much money he thinks Oxfordshire will receive under this initiative, because I suspect that it will be very little.

Mr. Blunkett: I shall be happy to write to the hon. Gentleman and let him know how many outside toilets in Oxfordshire schools will be replaced and how much will be spent on the replacement of boilers and heating systems. I can assure him that the allocation of new deal resources will be made fairly and openly and will be based on need, as is the allocation from the Department of the Environment, Transport and the Regions. I am sure that he will agree that it will be done in precisely the same way as his right hon. and hon. Friends allocated resources before the general election.

Mr. Harry Barnes: The statement is exceptionally welcome for Derbyshire, which is in great difficulty in all the respects described by my right hon. Friend. It has had to exceed its capping level in order to maintain its expenditure, and its primary schools probably have larger classes than those in any other shire county. Schemes to tackle such problems are very welcome. If it all works in Derbyshire, it will work throughout the country.

Mr. Blunkett: I am grateful to my hon. Friend for what he has said, and for his commitment and enthusiasm. It is worth recalling that we have also allocated £1.1 million to Derbyshire county for the investment that will be needed in September to fulfil the pledge on class sizes,

and a further £1 million for the city of Derby. We have made some progress, although much more remains to be done to overcome the legacy of 18 years from which Derbyshire is suffering.

Mr. David Chaytor: Parents and teachers in Bury will welcome the statement, as they welcomed the education statement in last year's Budget and the statement on the standards fund in February this year.
Does my right hon. Friend agree that one of the worst legacies of the past 18 years is the continued existence of enormous discrepancies between the per capita funding of children in primary and secondary schools across the country? My schools in Bury are in one of the small group of authorities with chronically low per capita funding. Consequently, they struggle to obtain basic materials, and, even with the help over class sizes, they will continue to struggle next year.
The solution can lie only in the reform of the current SSA system. Has my right hon. Friend any plans to start reforming it, so that education investment can be distributed more equitably?

Mr. Blunkett: My right hon. Friend the Deputy Prime Minister and my hon. Friend the Minister for Local Government and Housing are aware of the considerable pressure for rapid change exerted by, among others, those who previously supported the SSA system. I think we all know that there is improvement to be made, and the Department of the Environment, Transport and the Regions is working on that.
Bury makes excellent provision. It has an excellent local education authority with excellent schools, and it will have come as close as any authority in Britain to eliminating classes of 30 or more by September this year.

Mr. Hugh Bayley: Following today's performance, the next statement that we hear from Opposition spokesmen about education will have to feature this question to my right hon. Friend: "Apart from cutting school class sizes, getting rid of outside toilets, providing proper heating systems and improving education standards, what have a Labour Government ever done for the education of our children?"
Let me make a more serious point. Does my right hon. Friend agree that, to make capital go as far as possible, the Government need to consider private-public partnerships? Might it not be a good idea for the Department to scour the executive agencies under its umbrella for talented people with experience of such partnerships, and to try to establish a unit that would put their skills to use?

Mr. Blunkett: I cannot list all the items—including books and equipment—that we have provided in our first 10 months of government, and all the things that we have managed to do so far. Over the months ahead, however, I shall do my best to ensure that the outside world hears about them.
I am mindful of the important question that my hon. Friend has raised. There are people with great expertise whose present employment has enabled them to understand the development of capital programmes and the planning process, and we hope to be able to draw on their expertise in developing still further the substantial public-private partnership programmes that are about to take effect throughout the country.

Business of the House

The President of the Council and Leader of the House of Commons (Mrs. Ann Taylor): With permission, Madam Speaker, I shall make a statement about the business for next week.
MONDAY 23 MARCH—Conclusion of the Budget debate.
TUESDAY 24 MARCH—Conclusion of remaining stages of the School Standards and Framework Bill.
WEDNESDAY 25 MARCH—Until 12.30 pm, debate on the second to fifth reports from the Select Committee on Health on children's health, followed by a debate on the third report from the Select Committee on Environment, Transport and Regional Affairs on the proposed strategic rail authority and railway regulation, followed by debates on the motion for the Adjournment of the House.
Progress on remaining stages of the Government of Wales Bill (First Day).
THURSDAY 26 MARCH—Conclusion of remaining stages of the Government of Wales Bill (Second Day).
FRIDAY 27 MARCH—Private Members' Bills.
The provisional business for the following week is as follows:
MONDAY 30 MARCH—Consideration in Committee of the Scotland Bill (Seventh Day).
TUESDAY 31 MARCH—Consideration in Committee of the Scotland Bill (Eighth Day).
WEDNESDAY 1 APRIL—Until 2 pm, there will be debates on the motion for the Adjournment of the House.
Remaining stages of the Regional Development Agencies Bill.
THURSDAY 2 APRIL—Opposition Day [10th Allotted Day] (first part).
Until 7 pm, there will be a debate on a motion in the name of the Liberal Democrats. Subject to be announced.
FRIDAY 3 APRIL—The House will not be sitting.
The House will also wish to know that on Wednesday 25 March there will be a debate on bananas in European Standing Committee A, and a debate on aid to shipbuilding in European Standing Committee B.
On Wednesday 1 April, there will be a debate on renewable sources of energy and the energy framework programme in European Standing Committee B.
Details of the relevant documents will be given in the Official Report.
[Wednesday 25 March:
European Standing Committee A—Relevant European Community documents: (a) 5357/98, Bananas; (b) 6150/98, Assistance for Traditional ACP Suppliers of Bananas. Relevant European Legislation Committee reports: (a) HC 155-xvi (1997–98); (b) HC 155-xxii (1997–98).
European Standing Committee B—Relevant European Community documents: 11165/97 and 11167/97, Aid to Shipbuilding. Relevant European Legislation Committee report: HC 155-ix (1997–98).
Wednesday 1 April:
European Standing Committee B—Relevant European Community documents: (a) 13035/97, Annexes I, IV and VI—Energy Framework Programme (1998–2002); (b) 13035/97, Annex V—Energy Framework Programme: Save II; (c) 5140/98, Renewable Sources of Energy; (d) Unnumbered, Renewable Sources of Energy: Council Resolution. Relevant European Legislation Committee reports: (a) HC 155-xxi (1997–98); (b) HC 155-xxii (1997–98); (c) He 155-xviii (1997–98); (d) HC 155-xxii (1997–98).]
The House will also wish to know that, subject to the progress of business, it will be proposed that the House should rise for the Easter recess on Wednesday 8 April until Monday 20 April.

Sir Patrick Cormack: I thank the right hon. Lady for giving us the business, and echo the words of my right hon. Friend the Member for South-West Norfolk (Mrs. Shephard) in thanking her for again giving us two weeks' business. I also thank her for clarifying the dates of the Easter recess and say how helpful it is to know those. Last week, she said that she hoped to say something at a fairly early date about any possible Whitsun recess. The sooner we can have that news, the better.
The right hon. Lady mentioned the Government of Wales Bill in next week's business. She will know that we have been extremely glad to co-operate in the programming experiment in respect of two major constitutional Bills. We want that experiment to succeed, as I know she does, but does she accept that, now that the Government have tabled several important new clauses, which we welcome, and well over 100 amendments, the two days that were initially agreed for Report are not adequate?
If the programming system is to work, it is terribly important that some flexibility should be built into it, so that if the Government do that to a major Bill at a late stage we can have some extra time.
Will the right hon. Lady also accept that it is essential for the House to have a sight of the registration of political parties Bill—in draft form at the very least—before we complete consideration of the Government of Wales Bill?
The right hon. Lady has worked hard as Chairman of the Modernisation Committee; both my right hon. Friend the Member for South-West Norfolk and I have paid tribute to her on several occasions for that. When are the Committee's two latest reports likely to be debated, bearing in mind the fact that, this week, the Leader of the House has written to hon. Members suggesting that, in some cases, there will be a need to change the Standing Orders of the House and perhaps even legislative changes will be called for? The sooner the reports themselves can be debated and approved in principle, the better.
On many occasions recently, my right hon. Friend the Member for South-West Norfolk has called for a debate on the national health service. Although we fully appreciate that the health service is relevant to the Budget debate, particularly in the light of yesterday's statement, may I point out that that was the eighth statement that we have had in recent times on the NHS, and that the substance of yesterday's statement was that it will take the Government two years to get back to where waiting lists were on 1 May? It is essential that we have a debate on that as soon as possible.
Is the right hon. Lady aware that there is a great crisis in the museums world, particularly for many of our great national museums and galleries? Will she accept that the Budget did not begin to address the seriousness of the problem? May we have a debate on the matter quite soon?
In view of the considerable uncertainty that the Prime Minister displayed yesterday over the Red Book, or, as my right hon. Friend the Leader of the Opposition called it, the unread book, perhaps the Government should organise a teach-in on that document and ensure that all Ministers attend.
In the light of today's revelations, may we have a further statement next week on the conditions and security in Northern Ireland prisons? Will the right hon. Lady accept that we should like to have a full debate on the issue in the near future?
This is the period of our presidency of the European Union, but we have not yet had a general debate on foreign affairs. The Foreign Secretary's love of racing and support for country sports endear him to many Opposition Members. We realise that he is trying to do his best and that he has not yet made the sort of bloomer that a predecessor is alleged to have made when he asked a cardinal archbishop to waltz during the national anthem. However, it seems to us that the right hon. Gentleman's finesse is perhaps not as accomplished as it might be, and we should like a debate on foreign affairs so that he can explain himself.

Mrs. Taylor: The hon. Gentleman asked a number of questions, and I will try to deal with all of them. He asked about the Whitsun recess. I am hoping that we can have a week at Whitsun, but it will depend on the progress of business. The hon. Gentleman will be aware of the pressures on time, and I cannot give a guarantee at this stage.
We were pleased that the official Opposition and the minority parties thought it right to make progress on the Government of Wales Bill through a programming motion, and, as the hon. Gentleman said, we wish to see that experiment succeed. When the timetable was originally drawn up, it was envisaged that there would be significant issues to be discussed on Report stage; hence the two days that have been allocated. As the hon. Gentleman said, the Opposition welcome some of the more significant changes that have been made, and many of the other amendments to which he referred are technical. It is for the Business Committee to consider whether any injury time might be required on either of those days should there be the prospect of statements. Overall, the experiment has been extremely useful, and I am grateful for the co-operation we have had from all parts of the House.
I appreciate what the hon. Gentleman said about the need to make progress on the Bill on the registration of political parties. He will know that there have been significant consultations on the matter to try to ensure that what we propose is satisfactory to everyone involved. I hope that we will be able to see the Bill before long.
The hon. Gentleman asked about a debate on the reports from the Modernisation Committee. I, too, would like to see a debate on those matters, not least because I think that the general reception throughout the House has been positive and because, as he said, we may wish to make specific changes to Standing Orders. I do not hold out any


prospect of such a debate before Easter, but I hope that we will be able to make some time available after that, so that the House can have an opportunity to express its views.
The hon. Gentleman asked about a debate on health. I am sure that my right hon. Friend the Secretary of State for Health would welcome an opportunity to talk about the extra money that he has been able to make available for the health service. As the right hon. Member for South-West Norfolk (Mrs. Shephard) has requested a debate on the health service previously, I checked up on the matter. When the Conservatives were in government between 1992 and 1997, they had only one general debate on the health service. I hope that we can do slightly better than that. It is always open to the Opposition to use Opposition days for that issue.
As for the impact of the Budget on museums, it is still open to hon. Members to participate in the on-going Budget debate. Hon. Members who have a specific interest in that matter still have two days in which to take part in the debate.
The hon. Gentleman mentioned the serious situation in prisons in Northern Ireland. He will be aware that, at the beginning of the week, there was a private notice question—which you, Madam Speaker, allowed—enabling the relevant Minister to explain the situation. The hon. Gentleman will be aware also that there are inquiries into events there. I am sure that the House will be kept informed of any developments.
As for the hon. Gentleman's comments on the presidency of the European Union and a general debate on foreign affairs, I cannot promise that we can have such a debate before Easter. However, we should like to have a debate on foreign affairs as soon as we can find some time in the parliamentary calendar to do so. I am sure that my right hon. Friend the Foreign Secretary will acquit himself well, as he always does.

Mrs. Gwyneth Dunwoody: May I tell my right hon. Friend how grateful the Select Committees will be for the opportunity to debate their reports? I look forward to Wednesday morning's debate on the strategic rail authority. It will be a great asset if the Select Committee's work is recognised on the Floor.
However, having congratulated my right hon. Friend on that, may I ask her whether she will expedite the debate on modernisation of the House? Although there seems to be an astonishing amount of compliance between the two Front Benches—which always worries any sensible Back Bencher—some of the suggestions on timetabling, including timetabling in Committees, are not only extremely difficult to accept, but could be said to be anti-democratic. I hope that she will not run away with the idea that everyone in the House thinks that those reports are the best thing since sliced bread.

Mrs. Taylor: I am grateful for my hon. Friend's earlier comments on the Select Committee report. Some Select Committee reports should be debated on the Floor of the House, and she has been very fortunate to get a debate on a report in which I know she has a very specific interest.
My hon. Friend mentioned Committee timetabling and procedure. I should remind her that those matters were the subject of previous reports of the Modernisation Committee, and that those reports were endorsed by the

House, which approved them with nobody voting against. However, opinions are divided on some of the matters, and the two Front-Bench teams are not in agreement against everyone else. The Modernisation Committee's reports have had the support not only of Front Benchers but of Back Benchers on both sides of the House, and of experienced Members and new Members alike. That is another reason why everyone should be able to participate in the debate.

Mr. Andrew Stunell: Will the Leader of the House take very seriously the point made by the hon. Member for South Staffordshire (Sir P. Cormack) on the Government of Wales Bill, to which the Secretary of State for Wales has tabled 117 amendments? I take the right hon. Lady's point that we will have to work constructively, and it would be very helpful if there could be further discussions on that matter.
Will the Leader of the House speak to the Chancellor of the Exchequer and to the Deputy Prime Minister and ask them jointly to publish a Green Book, which was originally promised to accompany the Red Book and would outline the Budget's environmental impact? Some pages in the Red Book cover some of the Budget's impacts, but they give a very partial and incomplete picture of the environmental impact of the overall Budget strategy.
Will the Leader of the House also ask the Secretary of State for the Environment, Transport and the Regions to make a statement to the House on radioactive discharges from Sellafield that have entered the North sea? They are now the cause of international complaint and are affecting fisheries in Scandinavia.
May I also reinforce the point made by the hon. Member for Crewe and Nantwich (Mrs. Dunwoody) on the Modernisation Committee? It would be a sad thing indeed if all the Modernisation Committee's proposals were greeted with utter unanimity. I would welcome—as I know that the House would welcome—an opportunity to debate the proposals, with the agenda moving forward even more strongly.

Mrs. Taylor: The hon. Gentleman asked me about the environmental impact of the Budget. As he acknowledged, some pages of the Red Book deal with that. If he has further points to make, I repeat what I said earlier—there are two days left of the Budget debate and he may be fortunate enough to catch your eye, Madam Speaker.
I understand that the hon. Gentleman has a particular interest in radioactive waste in the North sea. He will be aware that a change in the authorisation in 1994 resulted in increased radioactive discharge limits. The Environment Agency has just completed public consultation on draft new authorisations which will reduce discharge limits. I hope that that will reassure him that the Government share his concern and are keen to take action in an attempt to minimise the problems.
The hon. Gentleman is right in his comments about the Modernisation Committee. We cannot expect unanimity, but, so far, the responses that we have received to our proposals have, by and large, been positive. However, it remains to be seen whether there will be such a level of agreement when we discuss such issues as electronic voting or even the timing of sittings of the House.

Mr. David Winnick: In view of the way in which Tory Members have done their very best to


destroy the Bill introduced by my hon. Friend the Member for Worcester (Mr. Foster) to ban hunting with dogs, is my right hon. Friend aware that there is very strong feeling among Labour Members that the measure should be discussed in Government time? Even if the Government cannot rescue the Bill—although one wishes that they would—may we have a statement that, at least in the lifetime of this Parliament, the issue will be debated in Government time so that that barbaric sport can be stopped for ever? That is what Labour Members want. Undoubtedly, a large majority in the country want the House of Commons and Parliament to take the necessary action to stop hunting with dogs.

Mrs. Taylor: I am glad that my hon. Friend makes it clear that if the Bill fails, it will be due to the actions of Conservative Members and not the Government. The Government have always made it clear that there is no question of making Government time available for any private Member's Bill during this Session, and it would be wrong to treat the Bill to which he refers differently from any other. We have said on a number of occasions that we intend to keep the issue under review; that remains our position.

Mr. John Wilkinson: May I remind the right hon. Lady of the Government's clear commitment to produce a White Paper on the future of London's government in the week beginning 23 March? Therefore, may we expect next week the White Paper and a statement from the Deputy Prime Minister, together with another statement on the future of London Transport underground finance? Is it not the case that the modernisation of Britain is going ahead only in rhetorical terms, and that, in practical terms, commuters using London Transport underground have had no improvement in service and only an escalation in fares?

Mrs. Taylor: I believe that my right hon. Friend the Deputy Prime Minister will be in a position to make a statement about the government of London next week, as promised. I am pleased that the hon. Gentleman gives me the opportunity to mention that. As for London underground—unusually, but because of the importance of the issue—my right hon. Friend will be in a position to make a statement tomorrow.

Mr. Harry Barnes: On 24 February, my right hon. Friend the Prime Minister made a statement on Iraq during which I asked what the Government intended to do to advance democracy, peace and economic and social progress there. My right hon. Friend said twice that we will do what we can. May we have a debate on how the Iraqi people can be assisted in their plight, as the problem has not gone away?

Mrs. Taylor: Both the Prime Minister and the Foreign Secretary have mentioned the need for follow-up action along those lines. My hon. Friend will not be surprised that I cannot promise another debate on Iraq in the near future. However, he will be aware, as he has participated in such debates on previous occasions, that we always have an open three-hour debate on the Adjournment before each recess; he may be able to raise that topic then.

Mrs. Margaret Ewing: I am sure that the Leader of the House is aware that the Highlands and

Islands Convention is meeting on 3 April. Could she arrange for a statement from the Department of Trade and Industry or a full debate in Government time on European Union structural funds—an issue which is important not just to the highlands and islands, but to many others who want to know the Government's approach to negotiation in the next few months?

Mrs. Taylor: I am aware of that meeting. We have tried to arrange business in the House to accommodate it. My right hon. Friend the President of the Board of Trade has made our position on EU structural funds very clear. Although there have been some concessions, there is still a good deal of negotiation ahead of us. We are willing to contribute to the costs of enlargement, but that must be done on a fair basis, taking account of all the factors. There may be more information available by the time of the meeting to which the hon. Lady refers.

Judy Mallaber: Will my right hon. Friend find time for an early debate on the consultation processes on applications for opencast mining, in view of events in my constituency earlier this week, when a parish council met to consider the threefold extension of the Trinity opencast site? I am concerned that there may be similar problems elsewhere. The parish council chairman, who owns part of the site, allowed in only 16 members of the public, was not heard to declare his interest, allowed a vote to be taken in secret, and vacated the chair only just before the vote was taken. We should consider whether there are similar problems throughout the country.

Mrs. Taylor: My hon. Friend raises a series of unusual circumstances relating to one application. I shall pass her concerns on to the relevant Ministers. She will know that the consultation period has now been completed and that Ministers are entering further discussions on the issue. I shall make sure that my hon. Friends make further inquiries about the procedures followed in the case that she has raised.

Mr. William Thompson: I note what the Leader of the House has said about the scandalous situation in the Maze. She said that the matter was dealt with in the private notice question at the beginning of the week, and she mentioned that an inquiry is going on. I understand that it has been completed and the report is now with Ministers in the Northern Ireland Office. Will she review her decision? When that report becomes public, can we have a debate? The situation is serious—indeed, it is a laughing stock in the press and other media, as well as among the ordinary people in the street in the United Kingdom. We should have time to discuss such a scandalous state of affairs in a part of the United Kingdom.

Mrs. Taylor: It would be wrong to anticipate the conclusions of any report by promising a debate or saying that one was needed. I shall bear in mind the hon. Gentleman's request.

Mr. Steve McCabe: Is my right hon. Friend aware of the welcome news today that the Korean car giant Daewoo has invested £160 million in Britain? I understand that the joint investment with Birmingham-based LDV will secure 1,500 jobs and create


2,000 new ones. LDV is a van manufacturing company which almost went out of business because of the neglect of manufacturing under the previous Government. Will my right hon. Friend consider making Government time available for a debate on the Government's approach to investment in vehicle manufacturing?

Mrs. Taylor: I am sure that my hon. Friend will be more than delighted with the announcement and the security of jobs in his area. It is a good news story, but, as I have said to other colleagues on other occasions, it is not always possible to find time even to debate good news.

Mr. Nicholas Soames: Will the right hon. Lady ensure—even given her often expressed views on the difficulty of finding time for a further foreign affairs debate, which I perfectly understand—that the Foreign Secretary has an opportunity to make a statement on how he had to cope with the shockingly petulant and bad-mannered reaction of the Israeli Government to his visit to Israel? Does she agree that the middle east peace process, and the role of Europe and the United Kingdom in it, is of substantial importance to this country's interests and that, at the very least, the Foreign Secretary should have the opportunity of making a statement to the House?

Mrs. Taylor: I know that the hon. Gentleman has a long-term interest in this matter. Indeed, he was one of those who were very keen to ensure that the Foreign Secretary was active in this regard. The Foreign Secretary makes statements to the House whenever there is anything specific to report. The hon. Gentleman is right to say that it is important for this country that progress should be made in the middle east peace process. I hope that, during the summer, we will find time for a full debate on foreign affairs. When there is anything specific that is important enough to warrant a statement on the Floor of the House, my right hon. Friend the Foreign Secretary will keep the House informed of it.

Mr. Edward Garnier: Did I hear the right hon. Lady correctly when she said that the Deputy Prime Minister would make a statement tomorrow on London matters? If that is so, will she use her offices to ensure that all London Members are told about it, because many may not have been present to hear what she said?

Madam Speaker: That is their problem.

Mr. Garnier: It may well be their problem, but if the Leader of the House could assist them, I am sure that they would be most grateful. I always like to be as helpful to the Labour party as possible.
When will the Human Rights Bill be in Committee on the Floor of the House?

Mrs. Taylor: On the first point, I can confirm that I said that there would be a statement tomorrow. The official Opposition and minority parties have been informed of that, and I shall leave it to them to inform their own London Members.

Madam Speaker: Hear, hear.

Mrs. Taylor: On the second point, I have announced business up to the week before the Easter recess. I do not anticipate the Human Rights Bill coming back to the House this side of Easter.

Orders of the Day — WAYS AND MEANS

Order read for resuming adjourned debate on Question [17 March].

AMENDMENT OF THE LAW

Motion made, and Question proposed,
That it is expedient to amend the law with respect to the National Debt and the public revenue and to make further provision in connection with finance; but this Resolution does not extend to the making of any amendment with respect to value added tax so as to provide—

(a) for zero-rating or exempting a supply, acquisition or importation;
(b) for refunding an amount of tax;
(c) for varying any rate at which that tax is at any time chargeable; or
(d) for any relief, other than a relief which—

(i) so far as it is applicable to goods, applies to goods of every description, and
(ii) so far as it is applicable to services, applies to services of every description.—[Mr. Gordon Brown.]

Question again proposed.

Orders of the Day — Budget Resolutions and Economic Situation

[Relevant documents: The Third Report of Session 1997–98 from the Social Security Committee, on Tax and Benefits: Pre-Budget Report (HC 423), and the First Report of Session 1997–98 from the Environmental Audit Committee, on the Pre-Budget Report (HC 547).]

Mr. Deputy Speaker (Sir Alan Haselhurst): Before I call the Secretary of State for Social Security and Minister for Women, I must announce Madam Speaker's decision that the 10-minutes rule will apply to Back-Bench speeches throughout the debate.

The Secretary of State for Social Security and Minister for Women (Ms Harriet Harman): Welfare reform is at the heart of the Budget that my right hon. Friend the Chancellor unveiled to the House on Tuesday. Welfare reform is central to building a better and more successful Britain.
Under the previous Government, the welfare state was allowed to fall into disrepair, so that it acted as a brake on economic success and a lever for widening social division. The system prevented people from getting into work—writing off millions of people who wanted to work to a dead-end life of poverty and dependence on benefits. It discouraged people who were in work from getting on in their work, by imposing effective tax rates of 80 per cent. or more on people with low incomes who were trying to increase their earnings. The system imposed a cap on their aspirations. Everyone was left to foot the spiralling social security bill, which grew by £45 billion in real terms over 18 years, until it cost more than health and education put together.
None of us can ignore the results of that failure when one in five working-age households has no one in work and nearly 4 million children are being brought up in poverty. Faced with that legacy, it is our duty to reform the welfare state. We are determined to make welfare work for Britain, to create a modern welfare state to help rebuild a cohesive society and a strong economy.
The Budget, delivered after just 10 months in government, is an important step along that road. It marks an entirely new relationship between tax and benefits, and between the Treasury and the Department of Social Security.
Options for streamlining the tax and benefits systems have been explored by every Government in the past 30 years, but all previous attempts have failed. This Budget marks a turning point, because we are a modern Government determined to break down barriers between Departments, and not to let turf wars get in the way of achieving our objectives.
We have a clear and modern view of how to reform welfare and tackle poverty. Next week's Green Paper on welfare reform, from my right hon. Friend the Minister for Welfare Reform, will set that out in more detail.
Welfare reform is a long-term business. It has to deliver a system that is fit for the 21st century, and will last. Although the principles from which we start are 50 years old, they are just as relevant today as they were when Beveridge first set them down: society has a responsibility to help people in genuine need who are unable to look after themselves; individuals have a responsibility to help provide for themselves when they can do so; and work is the best route out of poverty for those who can help themselves.
The principles remain the same, but the social and economic context has been transformed. The nature of work has changed, with a shift away from full-time manual work towards part-time service sector employment, and a widening pay gap between those at the top and those at the bottom.
The distribution of work has changed. Despite the fact that the proportion of people in work has remained broadly the same, there has been a growing divide between work-rich and work-poor households. The structure of families has changed. One in three marriages end in divorce, and women's lives have changed dramatically.
Fifty years ago, when William Beveridge set out his principles for the welfare state, he was applying them to a world in which most women gave up "gainful occupation" when they got married and undertook instead to perform "vital unpaid service".
In the next thirty years,
he said,
housewives and mothers have vital work to do in ensuring the adequate continuance of the British race.
That is not so in the 1990s. Women today are more likely to be mothers and workers than mothers and housewives.
Nowadays, two thirds of all married mothers go out to work, and whether they work full time or part time, their work is vital to the family income. The days are gone when women were as rare a sight in the workplace as men often are in the kitchen. Britain now depends on women's work as well as men's.
The welfare system failed to adapt to those changes, and so has become increasingly outdated. The previous Government's critical mistake—one that the Opposition are no doubt still making to this day—was to fail to recognise that the world had changed and women were changing their lives. Women do not want the Government to tell them not to; they want the Government to back them in the choices that they are making—and that is what we are doing.

Kali Mountford: I congratulate my right hon. Friend—[HON. MEMBERS: "Give her a job."] That seems to surprise the Opposition. My right hon. Friend has often been a lone voice in the House in her support for child care strategies. Is it not a good thing that at last we have a comprehensive child care strategy that will enable women who want to work to do so?

Ms Harman: I thank my hon. Friend warmly for her comments. She points out the fact that the Government are changing the agenda in a way that women want—something which the previous Government failed to do.
We are modernising the system so that it goes with the grain of change—putting Beveridge's principles into practice, but in a modern setting. We are making sure that welfare works for women as well as for men, because women head the poorest families and are the lowest paid, and are also the most likely to have caring responsibilities.
We are constructing the building blocks for economic success through employment and opportunity for all, by helping people to move into work, by ensuring that work pays, and by providing help to those who cannot work.
Last year's Budget launched the biggest ever assault on worklessness and poverty, through the new deals for the young and the long-term unemployed, for lone parents and for sick and disabled people who want to work. This year's Budget goes further in helping those who want to move into work to do so, by giving more active support, by taking obstacles to work out of the system, and by making work pay.
What active support are we giving? We know that in the modern economy skills and qualifications are the key both to getting a job and to getting on in that job. That is why we are investing heavily in helping young unemployed people to improve their skills and education, through the new deal for 18 to 24-year-olds.
For lone mothers, the problem of lack of skills is even greater. Whereas the number of young unemployed people who do not have qualifications is one in five—that is serious enough—half of lone mothers have no qualifications. So today I am building on the work begun by the Select Committee on Education and Employment, for whose work I place my gratitude on the record, by announcing a new initiative to help lone parents to improve their skills and qualifications through in-work training—backed, in its original pilot phase, which will start in eight pilot areas in October, by a £10 million investment made by my right hon. Friend the Chancellor.
We are also investing a further £25 million that is needed to enable us to respond to the demands of lone parents with children under five who, although they have


not been invited in to the new deal for lone parents, are coming forward and asking to use our services. The extra investment is being made to meet that demand.

Mr. Nick Gibb: Does the right hon. Lady believe that the pilot schemes for the new deal for lone parents have been a success, with only a 6 per cent. return-to-work rate?

Ms Harman: I think that I would put that question back to the hon. Gentleman, and ask whether he really thinks that we could ever go back to a time when the policy for lone parents was simply to say, "Stay on benefit until your youngest child is 16, and be written off into a life of dependence."
The pilot schemes have started, and the progress that they are making is encouraging. They are being welcomed by lone parents, and the personal advisers are responding brilliantly to the new challenge. Employers are beginning to change their shift patterns so that they can employ lone parents.
The full evaluation of the additional work gained by lone parents will be published in due course, but I must remind the hon. Gentleman that, under the Tory Government, the number of lone mothers on income support reached more than 1 million, and those mothers were bringing up more than 2 million children on income support.
As a result of the present Government's approach, and the measures that we are introducing, the number of lone mothers bringing up their children entirely dependent on benefit will start to fall—and I hope that at that stage the hon. Gentleman will have the grace to recognise that ours is a pioneering and long overdue programme.

Mr. Gibb: rose—

Ms Harman: I shall not give way again, because I must make progress.
It is a measure of the success of the new deal for lone parents that it is now inconceivable that anyone would seriously say to lone mothers that they should stay on income support until their youngest child is 16. After just 10 months of Labour in Government, that approach is gone for ever.
It was not only lone mothers whose aspirations to work were ignored by the previous Government; so, too, were the aspirations and capacities of people with health problems or a disability.

Mr. Steve Webb: Before the Secretary of State moves on from lone parents, may I ask her a question? I welcome the additional cash for child benefit, which lone parents will receive, but does the right hon. Lady accept that there is now an anomaly, in that this year lone parents on income support will get a fiver in family premium, and in 1999 they will get the £2.50 premium on child benefit, but in 1998–99, new lone parents will get neither? Should she not now reverse the cut for one more year, and protect people who become lone parents next year?

Ms Harman: No, because we are persisting with the principle that we have established—that it is not family formation but household income that should dictate the

amount of benefit received. We are going forward on the basis that the amount of benefit paid for children in workless households will depend on their age, not on whether there are one or two parents in the household. Lone parents and married women with children in workless households will move forward together as they get the benefit of our new investment in the children of the poorest families.

Mr. Phil Hope: As a result of all the tax and benefit changes in the Budget, will not the poorest 20 per cent. be £500 a year better off?

Ms Harman: My hon. Friend is right. This Budget is investing more in opportunities while improving the circumstances of the poorest families with children.
It was not long ago that the aspirations of lone mothers were written off, as were the aspirations of the long-term sick and disabled. Some people have such serious disabilities or health problems that they will never work, and the Government will always support those people in a life of dignity and independence. However, 2 million people with disabilities do work, and over 1 million more say that they would like to work but are not working.
That is why we are investing £195 million to identify the best ways of helping disabled people who want to work to find work. We are piloting a new personal adviser service from October, and we will be working with the voluntary and private sectors to test a range of other innovative schemes. That has never been done before. Previously, such people were written off.
To make sure that welfare works for women as well as men, we are investing £60 million from the windfall tax to enable women whose partners are unemployed to gain access to employment programmes themselves for the first time, so that they can receive the help that they need to get back to work. For the under 25s, childless women who have unemployed partners will no longer be written off. They will be treated in exactly the same way as their spouses.
It is unbelievable that, in this day and age, these women—under 25 and with no children—should be treated as unemployable by virtue of the fact that they are married to an unemployed man. Women do not view themselves just as dependants of their partners, and this modernising Government will not treat them as such. Women with children whose husbands or partners are unemployed can also choose to join the welfare-to-work programme, but for them—as for lone mothers—the programme will be entirely voluntary.
In addition, we are helping people to move into work by taking benefit obstacles out of the system. New rules to link periods of benefit entitlement will mean that sick and disabled people and lone parents who want to work will no longer have to worry about any financial risk involved in taking a job which may not work out. Lone parents in receipt of income support before April 1998 will be able to take a job knowing that they will return to the same rate of benefit if it does not work out within three months. People who leave incapacity benefit to take a job will be able to return to benefit at whatever rate they were previously being paid if the job falls through within a year, avoiding the risk of possibly losing as much as £40 a week in benefit.
We will help disabled people to play a fuller role in their communities and to take a step towards paid work by abolishing the rule limiting voluntary work to 16 hours


a week for those on incapacity benefits. As from October, disabled people who want to make a contribution to the community will no longer lose any benefit, however many hours they work on a voluntary basis.

Dr. Stephen Ladyman: I very much welcome that statement from my right hon. Friend. Many of the disabled people who have come to see me have expressed the need to be able to return to benefit in the way that she has described. One of the barriers preventing the disabled from working is the fact that sometimes they cannot work within the normal patterns that the rest of us can cope with. Will these innovative programmes consider the possibility that disabled people might be able to make a contribution, but in a different way from able-bodied people?

Ms Harman: My hon. Friend makes a very important point. We must recognise that there must be more flexible benefit patterns for people whose health condition might fluctuate, and more flexible working patterns must be available from employers. We mean business about this—we are serious. We are not happy that 1 million people are simply excluded from the jobs they might want to do because they have health problems or a disability. We must be able to respond to their capacities and abilities and not simply preside over a system which continues to pay them but writes them off.
The next part of our strategy is to make sure that work pays. This Budget helps us take a further major step forward. The introduction of the new working families tax credit—I pay tribute to the work of the Select Committee on Social Security on the issue—together with the national minimum wage, will not only make sure work pays, but will bring greater rewards for work by helping lower and middle-income families with children to keep more of what they earn.
The system will guarantee a minimum income of at least £180 a week for all families where someone works full time. It will guarantee that no working family pays any income tax at all on earnings below £220 a week. It will put a stop to the penal rates of marginal tax which have meant that some low-paid employees have had to pay back more than a pound for every extra pound earned.

Mr. Quentin Davies: Is the working families tax credit available to the self-employed? if not, why not? Is that not an irrational and invidious discrimination?

Ms Harman: The working families tax credit is available for people in employment, and the hon. Gentleman is right to place on the agenda further proposals to help people prosper through work, whether they are employed or self-employed. It is a major step forward, but further developments will have to be considered.

Mr. Archy Kirkwood: I am happy to acknowledge that the Government have responded positively to most of the ideas of the Select Committee in terms of the working families tax credit. However, the biggest barrier to work identified by the Government's research is the difficulty with housing

benefit. Responsibility for housing benefit is split with the Department of the Environment, Transport and the Regions, but it would help if the Secretary of State could say a word about the Government's plans for dealing with it in the future.

Ms Harman: We are concerned about the way in which housing benefit is operating, as we do not believe it is contributing to housing policy in the way it should. One of its problems is that it does not fit with our commitment to ensure that every part of the benefits system contains no disincentives to work—and, indeed, provides incentives. Together with the Department of the Environment, Transport and the Regions, we are reviewing the interaction of housing policy and housing benefit, and we will bring forward proposals for consultation shortly. We are well aware of the evidence to the Select Committee—and the Committee's report—which suggests that this matter needs further action.
The new disabled persons tax credit will bring greater rewards from work for people whose earnings are limited by long-term sickness or disability. Their new tax credit will be more generous than the disability working allowance that it replaces, with a lower taper and higher earnings thresholds. We are modernising the system to take account of the aspirations of disabled people in the workplace.
As part of modernising the system to take account of women's role in the workplace and their responsibilities in the home, the Budget takes a major step forward towards a national child care strategy for Britain—the key elements of which are quality, accessibility and affordability. For the first time, the Budget makes high-quality child care affordable for all families. We are providing low-income families with the cash they need to meet the costs of registered child care through the new child care tax credit. Parents will receive up to £70 a week towards the cost of their child care for one child, and up to £105 a week for two or more.
All families below an upper earnings cut-off will receive at least 70 per cent. of their child care costs, and changes to benefit rules will ensure that the lowest earners get even more. It will not just be the lowest earners who benefit—although they will benefit the most. A lone parent with two children under 11 may still be eligible for some child care tax credit even if her income reaches £30,000 a year, and a typical lone parent with one child and an income of up to £15,000 a year is still likely to be paid a full 70 per cent. of her child care costs.
Those changes, together with the announced £300 million investment in out-of-school child care, mark substantial progress in our national child care strategy for Britain. A Green Paper setting out that strategy in full will be published after Easter. I am truly proud of the progress that my right hon. Friends the Chancellor and the Secretary of State for Education and Employment and I have been able to make in delivering that manifesto promise in such a short time. We shall support parents by offering them choice backed up with opportunities, and opportunities backed up with real investment.
That is important for children, for their parents and for the economy. It is important for children because good child care can give them a head start, offering them educational and social opportunities before they start school, regardless of whether their mother works. It is


important for parents because it is what they want—the waiting lists for nurseries, after-school clubs and child minders are endless—as child care helps them to support their families by working, so that they can bring up their children on income from work, not benefits, and thereby break the cycle of joblessness and social exclusion. Child care is important because Britain's economy depends on women's work—as does the welfare of their families.
What happens in the workplace is also crucial if we are to ensure that people have opportunities to work—change in the workplace must be part of welfare to work. That means ensuring greater access for disabled people and tackling discrimination through our disability rights commission. For lone mothers—indeed, all mothers—it means that we must ensure that employment is family friendly, so that women can balance their responsibilities at home and at work.
Our changes to the tax and benefit systems—supported by the changes to the national insurance system that were announced by my right hon. Friend the Chancellor on Tuesday—will increase the rewards from work for millions of working people. We shall abolish the entry fee for both employers' and employees' national insurance, cut the cost of employing lower-paid workers by raising to £81 a week the earnings level at which employers start to pay national insurance contributions for their employees, and replace the distorting step rises in national insurance rates with a new unified rate of 12.2 per cent.
Together, all those changes are crucial in ensuring that the practice of the social security and tax systems meets the real needs of men, women and children today. The principles remain true to those of Beveridge—first, that work is the best route out of poverty for people who are able to work and, secondly, that individuals have a responsibility to help to provide for themselves when they can do so.
Beveridge's third principle—that society has a responsibility to help people in genuine need who are unable to look after themselves—also remains central. By helping people to provide for themselves when they can, and by minimising and rooting out fraud and abuse, we can better help those in genuine need. We are putting that principle into practice too, which is why we acted to help all pensioners to keep warm during the winter, and provided extra help for the poorest pensioners.

Mr. Simon Burns: As the right hon. Lady will remember, 40,821 duff cheques were sent out. Is she aware of the problem that is now becoming apparent—that pensioner married couples who are not on income support are receiving two cheques for £20? What will her Department do to rectify that loss to the public purse?

Ms Harman: The hon. Gentleman points out an error of some 40,000 payments in a programme that involved the better part of 10 million payments. The exercise was unprecedented, as the previous Government's approach to winter fuel was to tax it—not merely at 8 per cent., but at 17.5 per cent. We expect to make better progress next year—when we shall again make winter fuel payments—than we were able to do this year. I have acknowledged that there have been problems, but we shall iron them out. What is important is that, for the first time, we gave £20 to

all pensioner households and £50 to the poorest pensioner households, in which the pensioners were on income support.

Mr. Burns: Will the right hon. Lady now deal with the second point of my question? I asked her about the new problem whereby pensioners who are married couples and who are not in receipt of income support are being sent two cheques and twice the amount of money, and not the single cheque of £20? What will her Department do to correct that problem? Many pensioners are not sure whether they should cash the cheques or return one, and they are not receiving clear advice when they ring up the Benefits Agency.

Ms Harman: Two pensioners who live together should receive two cheques at £10; a pensioner who lives on his or her own should receive £20. Administrative errors are inevitable when payments to 8 million pensioners are made. That is one of the reasons why we invested in a public information campaign, backed by television and newspaper advertising, which the hon. Gentleman has gone to great lengths to criticise. We want people to have the information about their entitlements.

Mr. Burns: What is the right hon. Lady going to do about the mistake?

Ms Harman: I have answered the hon. Gentleman's question. He is merely nit-picking. We are making unprecedented payments, which is a big change from the behaviour of the previous Government, who put tax on fuel. He has not decided whether we are paying too little or too much—he is still trying to find his role, and I look forward to the time when he has sorted himself out.
Last week, I announced nine new pilot schemes to find the best ways in which to get more automatic help to the 1 million pensioners who do not claim the income support to which they are entitled.
In the Budget, we are making an extra £1.2 billion a year available to give more support to children and to direct extra resources to the poorest children. All parents—both in work and out of work—have to bear extra costs and responsibilities in bringing up their children. Child benefit remains the fairest, most efficient and most cost-effective way in which to recognise those costs and responsibilities.
That is why, from April 1999, the Government will increase the amount of child benefit for the eldest child by £2.50 to around £14 a week. The same increase will be made to the family premium in income support, jobseeker's allowance, housing benefit and council tax benefit to ensure that low-income families also gain from the change.
As the Chancellor said on Tuesday, we can and should do even more on child benefit. If child benefit is increased in future, there is a case for higher-rate taxpayers to pay tax on it—that must be right in principle. We shall bring forward detailed recommendations for reform.
Some families need more help than others, and the case for additional support for children in poorer families is strong. However, that support needs to be provided on the basis not of family structure—whether there are one or two parents—but of the needs of the children. It is important that we provide better help when families need


it most, which, as research has shown, is in the children's early years. I pay tribute to the research work carried out by the Joseph Rowntree foundation, which showed that the adequacy of benefits was a particular problem in relation to children aged up to 11, rather than to those aged 11 to 16.
That is why we are targeting extra help to the poorest families with younger children—we shall increase the allowance by £2.50 a week for children under the age of 11 in all the income-related benefits. That means that a family on income support with two children under 11 will be £7.50 a week better off.
The Budget shows that welfare reform is already happening in practice. We have set the direction, by building on principles that claim a direct lineage from the original chief architect of the welfare state. We have set the method, by applying those principles to a modern setting and by working with the grain of change in the wider society. We are making sound progress, delivering the results.
Next week, we shall publish our welfare reform Green Paper, to take forward the national debate on welfare reform for the 21st century.
This week's Budget and next week's Green Paper show that we now have a modern Government with a third way to tackle poverty and social exclusion, rejecting the right's view that one can tackle poverty simply by freeing up markets and relying on wealth to trickle down, and rejecting, too, the old left's view that one can tackle poverty simply by raising benefits. Instead, our approach, which is taken forward in the Budget, is to help people who can work to get work, so that they can look after themselves, and to free resources to invest in health and education and get better help to those who cannot work. This Budget has helped with work for those who can and security for those who cannot.

Mr. Iain Duncan Smith: First, I must thank the Secretary of State for her courtesy in sending me a letter to outline some of the changes in the Budget. I appreciate that and I shall look at it in the next few days as those changes are implemented.
Like all Budgets, Tuesday's Budget will take time to bed down. Much of the previous Budget was welcomed at the time, but now, 10 months afterwards, a great deal of it is being rejected by many of those same pundits who welcomed it. This Budget is no different.
My right hon. Friend the Member for Hitchin and Harpenden (Mr. Lilley) made clear in yesterday's debate that Tuesday's Budget amounted to a series of broken pledges. It seemed to have been conducted by a system of smoke and mirrors; there was little detail as the Chancellor glided over some of the more complex changes, preferring to say little and suggest a great deal.
As the Chancellor kept repeating, everyone supports the idea of getting people off benefit and into work. Every hon. Member is bound to accept that as a key criterion for any Government in reforming welfare. The real question that we must ask is to what extent the Budget and the changes that we have seen so far will produce that effect.
For obvious reasons, I shall say nothing about the welfare reforms that are likely to come in the Green Paper—they are likely to be produced next week and we will wait to discuss them—but I find it strange that Tuesday's Budget contains a major change in the tax system, which affects social security, but we have to wait until the Green Paper is published, after the Budget, to find out to what degree those reforms have affected the Chancellor's thinking. No doubt the Minister of State will tell us all when the time comes.
The real question for the Secretary of State and her right hon. Friends is to what extent they expect unemployment to fall—she suggested that it would. Will the right hon. Lady now commit herself to a figure, a proportion or a percentage by which she envisages unemployment falling as a direct result of all the changes that she is implementing in the new deal? So far, we have had little commitment on that and if the right hon. Lady wants to give me a figure, I am happy to give way and allow her to do so.
We intend to monitor closely the pilot programmes designed to encourage disabled people back into work. There is much detail to be considered there. I shall wait to find out how that scheme progresses before deciding whether it is successful. Anything that assists disabled people to get back to work or to get more meaningful employment has to be welcomed; the question is to what degree the scheme will work and how it will be targeted. We will wait and see how it develops.
I shall deal with three or four of the major changes that have taken place.

Mr. Hope: I am grateful to the hon. Gentleman for giving way and I welcome the hon. Member for West Chelmsford (Mr. Burns), who has decided to take his seat on the Opposition Front Bench this afternoon—he is obviously back in favour. If the Conservative party ever reached Government again, would they repeal the working families tax credit now that a Labour Government have introduced it to help the poorest families?

Mr. Duncan Smith: The hon. Gentleman is back on his usual form. He has been passed information from someone on the Government Front Bench and been told, "It's your turn to intervene." The only serious question that he has been able to come up with is, "What will you do when you get back into government in five years' time?" I cannot understand why Labour Members, who have been in power only for some 11 months, are so petrified about the Conservatives getting back into power. I shall answer the hon. Gentleman's question when the Government answer how they will explain to the British public that they have reneged on every pledge that they made before the election. When we get into government next time round we will do what is necessary to put the mess right, but let us get back to national insurance reforms, which are in the Budget, rather than the nonsense in which the hon. Gentleman is engaged.
The purpose of the change is to reduce the cost of employing low-paid workers. To some degree, the changes will undermine the Government's claim to be encouraging a high-skill economy in which people have high levels of training and there are opportunities for all—the claim covers not only the low paid but those on


average and just above average incomes. The Chancellor announced that employers would not pay national insurance contributions on the first £81 of an employee's weekly earnings and above that would pay a single rate of 12.2 per cent. on every pound up to £440.
The new Labour Government claim as another of their top priorities that they will turn Britain into a high-skill economy. There is a problem here—I hope that the Paymaster General, who I welcome to his position, will deal with it in his reply—as to some degree the change will clash with the pledge.
Surely by also increasing the national insurance rate, the Chancellor has directly increased the cost of employing workers who have the higher skill levels and those who would move to higher pay with on-the-job training. That could put a question mark over their employment. That fact has been recognised in the past 24 hours by a number of companies, including J. Walter Thompson, which represents an industry that is close to the heart of new Labour—it is a case of spinners in a spin—and which has said that the national insurance
changes are going to be a major cost for professional services companies.
I hope that the Paymaster General will deal with that when he replies.
That problem is compounded if we take into account the impact of the national minimum wage on the Budget changes. That wage will reduce the number of people earning between £60 and £80 a week by artificially inflating weekly take-home pay. As the Deputy Prime Minister noticed many years ago, that will force more employees up into the 12.2 per cent. band, as the differentials shuffle upwards. It will represent an extra cost to employers and create another barrier to work. I hope that the Paymaster General will give us some figures and some idea of what the Government calculate will be the impact of that change, given the others implemented in the Budget.
Employers are likely to respond to the change by hiring more part-time workers so that hours worked are restricted and the new earnings totals do not breach the earnings limit. Coopers and Lybrand has predicted that the present bunching of employment at just below £64 a week will shift to £81 a week. Again, perhaps the Paymaster General could tell us what calculations he made when considering that matter and how the Government intend to alleviate that effect.
Apparently, according to old new Labour, that sort of move would have been regressive in the run-up to the election. In the past 10 months, it has been attacked endlessly, yet implemented, and I would therefore be grateful if the Paymaster General could clear the matter up.

Ms Ruth Kelly: Is the hon. Gentleman seriously suggesting that the previous national insurance system, which meant an entry fee for both employer and employee, was a better system than that proposed by the Government? Would he revert to that system if, by the strangest chance, the country re-elected the Conservatives?

Mr. Duncan Smith: The hon. Lady said "the strangest chance"; perhaps she is a little less concerned than the hon. Member for Corby (Mr. Hope). I am not trying to persuade anyone to revert to the previous position.

I am simply pointing out—[HON. MEMBERS: "Ah !"] No, I am legitimately pointing out that a reform that continues what my noble Friend Lord Lawson started as early as 1988, and is seen as natural continuance, has knock-ons. It will have a major knock-on not because of what a Conservative Government would have done but because the major commitment that the Labour Government have made to the national minimum wage makes the whole thing different. The hon. Lady and her hon. Friends have to answer that question. It is not a question of the simple change, but of the shuffle-up that will take place as a result of the national minimum wage.
The working families tax credit is the Budget's flagship proposal. The Chancellor's proposal is not new: it has been around since the 1960s and does not necessarily lie along party lines. The idea of integrating tax and benefits has been adopted and opposed at different times by both main parties. Each time it has been proposed, it has been rejected, often with the assistance of Labour Members—and particularly the Secretary of State for Social Security.
One of why the reasons why the Secretary of State would have rejected the idea in the past is the old issue of wallet versus purse. She may have changed her view, but she was adamant about it before. The argument is well known among Labour Members, some of whom will no doubt rehearse it. When family credit was being debated, the arguments of the Minister for Welfare Reform were largely responsible for the change from a tax credit system to a benefit system.
The Chancellor says that he has solved the problem by allowing couples to make the decision after discussion and to tick the box. That is surely not a solution, as it simply adds complication, not only in bureaucracy but in the matter of who is to carry the main weight of decision. Perhaps the Secretary of State can tell us who will decide, in the case of a dispute between husband and wife, whose position will be pre-eminent.
Will the state take the view that the main breadwinner matters most, or that the wife should prevail? The Government will be in the position of arbiter between the two, perhaps even sitting at the breakfast table to decide who is right. Perhaps the Secretary of State can answer that point. Who will be pre-eminent? I invite her to intervene. There is no answer.
I hope that my hon. Friends will take note: the Government have launched a supposed solution, but are unwilling to answer a direct question on the main point.

Kali Mountford: I am somewhat bemused by the hon. Gentleman's assumptions about families. Does he at least agree that one of the problems with family credit is poor take-up? Many families suffer poverty unnecessarily. Does not this solution bring people out of poverty without the stigma of benefits, supported for so many years by the Conservative party?

Mr. Duncan Smith: There is no stigma. No evidence has been produced for that. In fact, when Martin Taylor was asked directly by the Social Security Committee what stigma there was, he had to admit that there was no evidence. I think that the Chairman of that Committee, the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood), is nodding. It is no good trying to build up a straw man as the reason for the change: the supposed problem does not exist. The take-up is more than 80 per cent. in financial terms and 70 per cent. in numbers.
Studies conducted for the Department of Social Security show that it is difficult to identify, among the 30 per cent. who do not take up family credit, whether stigma is the reason. In fact, the 30 per cent. contained many people who should not really have been identified as qualifying for the benefit. If the working families tax credit is predicated on the supposition of stigma, it is wrongly based.
The Secretary of State has not mentioned the experience of Canada and America. Canada has a benefits system that is in many ways close to ours. The WIS—working income supplement—system in Canada has failed and a benefit-based system is being reintroduced. What studies did the Government conduct on that? Perhaps the Paymaster General can answer.
Interestingly, the Government were even advised by Mr. Mendelson, who wrote the document for Rowntree, that for every $100 spent, only $6 went in the end to the objective of increasing employment. That was one reason why the scheme was abandoned. There was also a huge increase in fraud, and overall costs spiralled.
If the Government intend that the working families tax credit should shrink the benefits bill, they are clearly listening to the wrong argument, because it is much more likely to increase it. Even by their own admission in the Red Book, it will increase dependency by putting many more people on a 60 per cent. marginal rate. The Government's figures suggest that that will happen to an extra 250,000 people.
If, as the Minister for Welfare Reform said,
Means-tested Benefits, which are progressively withdrawn as income rises, act as a penalty on work and on effort
and are to be rejected, someone should explain why. The administrative cost to business will be increased and employers will be supplied with hitherto confidential information about household incomes. As was found in the Canadian experience, employers will know who is being cut in on the subsidy, and that leads to fraud.
If anything, stigma is increased, because more people know who is receiving the benefit. The experience in Canada and America was that that deterred people from taking it up. The Department's own figures show that the idea of stigma does not hold up. It would be nice to hear from the Paymaster General why all that evidence was chucked out.
The married couples allowance is perhaps the most devastating of the fault lines. There is a clear shift in Government policy on aspects of the family and the relationship between family and children. In further reducing the married couples allowance, the Government are sending a signal that marriage is not important to them and that they are in essence indifferent to the structure within which children are nurtured and cared for.
The hon. Member for Leicester, West (Ms Hewitt), who often features in these debates, and certainly in the Social Security Committee, claimed that marriage "doesn't fit any more" in today's society. It is revealing that she should have said that: it shows that new Labour thinks that marriage is in essence an outdated institution. The Budget

confirms that and puts into practice what has heretofore been simply a theory. Ruth Lister, a former member of Labour's Commission on Social Justice, congratulated the Government because the Budget
moves away from supporting marriage to supporting children and rightly so".
There is a debate to be had about that.
The previous policy, of reducing married couples allowance, was mistaken. By the time of the general election, it was changed. The previous Government decided that the policy was wrong and that the best way forward was to have transferable tax allowances to rectify the growing burden of the change in cost to families. We set a clear direction for ourselves.
The new Government have opened the gap and said that the concept of a married couple bringing up children in a family is no longer any more than a life style choice. The Government also plan to underwrite up to 70 per cent. of child care costs, up to a limit of £100 of eligible costs for families with one child, and £150 for families with two or more children.
The Chancellor claimed that he was being prudent with a purpose. I believe that the child care scheme is anything but prudent. The Government are attempting to regulate child care. Informal networks currently provide support for children and those informal arrangements will, by necessity, change following this proposal. The state will distort the existing patterns by promoting new ones. Following the change to the married couples allowance, that sends a further stark message to parents. The Chancellor is not just indifferent: he is saying to families where parents choose to stay at home, "You should put your child into care and go out to work—and here is an inducement." In essence, the Chancellor has become a persuader for child care: he is trying to persuade all parents, regardless of their position, to go out to work.
Financially, the Chancellor has failed to address the implications of the high take-up rate. When state subsidies are offered, experience dictates that they will be taken—and taken with a will. In other words, the Government are offering subsidies for child care and, in so doing, will be both meeting and creating demand. As the Institute for Fiscal Studies said yesterday:
We might see prices going up very rapidly, with the government simply finding itself subsidising profits and prices".
It begins to look very much like the issue of housing benefit and the way that that tends to force up prices. I dare say that the Government will deploy the same arguments against it in their review in two years' time in an attempt to introduce a cap.
In Britain, we have a heady mix of the highest proportion of lone parents on benefit and the highest child care costs in Europe. According to the Daycare Trust, British families pay the highest child care bills in Europe. It follows that the Government are in danger of running up a substantial bill for child care.

Mr. Hope: Will the hon. Gentleman give way?

Mr. Duncan Smith: I shall give way in a minute.
That bill will inevitably be passed on to taxpayers—although the Government do not want to tell them at this stage. The taxpayer will foot the bill. That reasoning is


reflected by calculations from the IFS, which claims that the cost will rise as high as £4 billion—not the £1 billion that the Government have allowed for in the Budget.
The Government's calculations do not add up. Even taking only the current number of children who are likely to take up provision, the cost will rise way past the £1 billion mark. So the IFS's £4 billion figure begins to look very reasonable. In those circumstances, taxpayers would incur the equivalent of an extra 3p in the pound on the basic rate of tax. That is yet another little broken pledge that the Government have quietly hidden away while seeking to increase the burden on the taxpayer.

Mr. Hope: rose—

Mr. Duncan Smith: I have already given way and I shall do so again in a minute.
The details of how this credit will operate have yet to be fully spelled out. If the Government rely on a scheme in which the costs are reclaimed, the bureaucracy involved will be enormous. Such a system would have to be monitored closely to avoid fraudulent high claims.
When children are involved, it is not simply a question of life style choices; it is a question of the structure within which children are brought up. It is wrong to view children in competition with marriage in this context. It is wrong to fund a higher level of child benefit by cutting another element in the tax system: the married couples allowance.
Family structure is very important. That fact is confirmed endlessly by research both here and across the Atlantic. A little publicised British project, the national child development study, showed how the "quite remarkable" difference in family situations of children who had done well by age 23, particularly educationally, despite the worst backgrounds in terms of income and housing, was associated with the fact that almost all had stayed with two original parents. American studies have shown the same thing.
The study is not a condemnation of the fact that some children are brought up, for whatever reason, in single-parent families, but it is an observation that, where possible, the two-parent family—and, in this case, the family with married parents—provides extra balance and structure that defines a child's upbringing. In this Budget, the Government are moving in the opposite direction: they have said that there is no difference and that therefore it is simply a life style choice.

Kali Mountford: The hon. Gentleman began by talking about the choices that families may make. What choices did families have under the previous Government, given that their child care record was the worst in Europe?

Mr. Duncan Smith: I must inform the hon. Lady that this is her Budget and this is her Government. If she does not want to discuss the Budget, that is fine—but I wish she would tell the Chancellor not to bother to produce a Budget every year. The hon. Lady must understand what is in the Budget. In my view, and in the view of many commentators, this is a retrograde step that will produce greater difficulties and lower the quality of child care.

It is absurd to suggest that the state should encourage parents to put their children into child care regardless of the family position, but that is what is in this Budget.

Mr. Hope: rose—

Mr. Duncan Smith: I have just given way, so I shall move on.
A leading liberal academic in the United States, Sarah McLanahan—who is in this country at present and has been feted by new Democrats and by new Labour—has reached exactly the same conclusion. She has spoken at length about the link between the demise in marriage and the demise in civil attitudes. In the United Kingdom, Melanie Philips has written about exactly the same concerns. The point is that the Government have chosen to move in the opposite direction. That is their position, so they must defend it and not pretend that it does not exist.
This Budget fails to redress the balance and, as a result, the situation will worsen. As my right hon. Friend the Leader of the Opposition said yesterday in response to the Budget, the Government had a chance to redress the situation. He offered the Government the opportunity to make the tax allowances transferable, but the Government have thrown that away. Therefore, the tax structure still bears down disproportionately on two-parent families, and particularly on married couples bringing up children.
In Britain, the income tax threshold for a married man with two young children fell from 101.2 per cent. of average male manual earnings to 34.9 per cent. between 1950 and 1993–94. To that extent, the burden has increased on married couples bringing up children and this Budget does nothing to rectify that situation—although it needed attention more than other measures that are in the Budget.

Mr. Malcolm Wicks: The hon. Gentleman raises some interesting ideas about the relationship between the state and marriage. Has he reflected on why marriage rates in this country have declined significantly in the past 18 years—arguably partly because of joblessness among young men? Has he also reflected on why, in the same period, the divorce rate in Britain has increased to the point where 40 per cent. of marriages now end in divorce? By the end of the Conservative years, Britain had the distinction—if that is the word that I am seeking, which it is not—of topping the European divorce league.

Mr. Duncan Smith: The hon. Gentleman always makes an interesting point. The number of marriages producing children has fallen from 81 per cent. to just under 70 per cent., so three quarters of all children will still be brought up by married parents. That is an important factor, although the number has fallen. The hon. Gentleman has supported my argument. I had hoped that this Government would do something about the problem of divorce rates. The experience is by no means unique to Britain—it is even worse in the United States. The problem is not quite so bad in parts of Europe, but that is changing. It is time for Government to act. The point is that the Government should have addressed that issue in the Budget, but they have moved in the opposite direction and are likely to exacerbate rather than ameliorate the problem.
Families have funded benefits and the expansion of the welfare state through higher tax. The Chancellor has reduced the married couples allowance partly to buy off his Back-Bench critics and partly to redress the changes to lone parent benefit for which he voted in December. It is worth addressing that point. The Prime Minister denied that that would take place. He told the House that the leaked stories that appeared in The Guardian were "wrong", but the stories about child care credit turned out to be very accurate. The articles about redressing the lone parent benefit changes also reflect the final package that appeared in the Budget.
According to the IFS, the Budget changes do not just redress the balance politically but go some way towards redressing it financially. It claims:
many existing single parents with children under the age of 11 will be more than compensated for the cuts in lone parent benefits".
The measures have a political element that has gone unmentioned. The child benefit increases amount to a cynical move fuelled by political pressure and they are not necessarily part of a rational package of welfare reforms.
On Tuesday, the Chancellor proclaimed that he had found a new faith in the increases in child benefit. Notwithstanding his desire to tax or means test them, suddenly he discovered this great element. New Labour has never publicly expressed faith in such rises. However, under fierce criticism, the Chancellor suddenly claimed:
Child benefit remains the fairest and most efficient and cost-effective way of recognising the extra costs and responsibilities borne by all parents. Raising it allows us to do more for mothers who choose to be at home, working at home bringing up children."—[Official Report, 17 March 1998; Vol. 308, c. 1107.]
If this is such a valuable benefit and raising it at the suggested rate is vital to creating a fairer society, why did the Chancellor fail to mention whether the increase will now be index linked and made annually throughout the Parliament?
Will the Secretary of State guarantee that no further cuts will be made to the married couples allowance, that no cynical device will be used in future and that it will be held at least at its present level?
New Labour says one thing and does another. This is a spin doctors' Budget. They have enjoyed it from start to finish. They have done their level best to spin and they continue. Labour claims that we should take it at its word, but we can do that only if we look at its words and reverse their meaning. The soundbite and sentence become the weather vane in the opposite.
New Labour came to power claiming that the tax burden on middle England was too high and that it had no plans to increase taxes. New Labour also claimed that it would encourage savings and security in retirement. How many of my right hon. and hon. Friends remember those words that were thrown at them during the election? New Labour has broken every one of those pledges.
Both objectives have been undermined by new Labour's economic policy. The Government's own figures in the Red Book reveal that taxes are set to rise and savings are set to fall. That does not reflect the fears and aspirations of working men and women throughout

Britain. Instead, it reflects the step-by-step betrayal of the golden economic legacy left to Labour by the previous Government. It is breaking trust with the British people.

Mr. Hope: Will the hon. Gentleman give way?

Mr. Duncan Smith: No.
New Labour had an opportunity to redress the severe tax that it imposed on thrift when it taxed pension funds last July. That was a missed opportunity, because no such action was taken. It was warned at the time by the actuaries that that action was likely to lead to greater difficulties in pension funds, but it took no action at all.
All those opportunities have been thrown out. The Government chose the wrong tax to redress and so highlighted their true instincts—and will now stand condemned. They did not even offer charities a reprieve from the abolition of the ACT dividend tax credit, as had been asked for.
We can take new Labour at its word only if we reverse its words. Throughout the Budget runs the fault line of sleight of hand—do not trust what we say, trust only what happens after we say it. Labour's motto is: we cannot be trusted.
Labour failed to cut welfare bills: welfare bills, which it pledged to cut before the election are now set to rise and rise again. It has increased tax when it said that it would cut tax. It has devalued pensions and threatened pension funds in a way not seen for many years. It has lowered investment levels in Britain.
At the beginning of its term in office, Labour is already breaking promises. I wonder what it will be like when it comes to leave government in four years' time.

Mr. Jim Cunningham: I shall try to be brief because I am aware that many of my hon. Friends wish to speak.
The Budget is based on the long-term decision making that is necessary if we are to prevent a return to the boom and bust years witnessed under the Tory spending spree in the late 1980s. As a result of that, inflation almost doubled in two years, peaking at more than 10 per cent. in 1990. Interest rates also rose to 15 per cent., fuelling large-scale repossessions and homelessness. That spending spree led to the longest recession in the post-war era and unemployment of more than 3 million for the second time in a decade.
The Government are committed to ensuring that Britain enjoys the kind of economic success capable of delivering long-term prosperity not just for the wealthy, but for the long-term unemployed, young people and lone parents, all of whom were forgotten throughout the 18 years of failed Tory government.
The Conservatives' golden economic legacy is more a legacy of debt and failure on a massive scale. After 18 years of Conservative government, Britain had the lowest investment among Organisation for Economic Co-operation and Development countries, the lowest job creation and one in five households without a wage earner. Every Tory Budget failed to answer those problems.
Social security now consumes more than £100 billion, about a seventh of the nation's wealth, yet under the Tories there was a massive rise in social exclusion and crime.
The Government inherited a national debt of more than £400 billion, its having doubled in the six years between 1990 and 1996. The public sector borrowing requirement was £23 billion in 1996, yet during the 1980s the Tory Government received billions through the privatisation programme. Oil and gas revenues alone totalled £80 billion, and that at a time when tax revenues rose by 43 per cent.
That debt equates to more than £26 billion a year in interest payments, or 10p on the basic rate of income tax. The Tories spent more servicing the national debt than they did on education. Under the Conservative Government, the average taxpayer contributed more than £1,000 a year to meet that legacy of debt.
The Government's commitment to sustainable and sound public finances can be seen in numerous measures undertaken since last May. The tough five-year deficit reduction plan is based on the need to encourage long-term investment, and the granting of operational independence to the Bank of England, which will provide a clear and accountable monetary framework, has already reduced long-term borrowing costs by one third of 1 per cent., which will save taxpayers around £6 billion a year.
Since the May election, the Government have twice had the opportunity to reduce corporation tax and, on both occasions, they have seized it. First, they reduced it from 33 to 31 per cent., then to 30 per cent., the lowest main rate among any of our major competitors. They also pledged not to raise that level during the remainder of this Parliament. The small business rate has also fallen, from 23 per cent. last May to 20 per cent. The changes to corporation tax will help nearly 2,800 businesses in Coventry, South alone.
The Tories failed the British people on tax, and that is why they lost so heavily at the election. They had had an 18-year history of deceiving the electorate on taxes. The tax take as a proportion of gross domestic product went up from just over 34 per cent. in 1979 to just under 36 per cent. in 1996. From 1979, the tax burden under the Tory Government was higher in every year bar one.
Under the Conservatives, so-called tax cuts were nothing more than an underhand shift from direct to indirect tax, from progressive to regressive tax, from taxing the rich to taxing the poor. The changes made by successive Conservative Governments resulted in a shift in the tax burden that penalised the poor. Between 1979 and 1997, the tax burden rose for everyone except those earning more than £64,000 a year.
The Conservative Government repeatedly broke election pledges on VAT. In 1979, they claimed that they would not increase VAT, but, after the election, in the first Parliament, VAT almost doubled from 8 to 15 per cent. In 1992, they again promised no more increases in VAT. The then Chancellor claimed that there would be no need to increase the scope or rate of VAT, but, by 1993, the Government had extended its scope to include domestic fuel. That was a particularly cruel move, which hit most severely the elderly and the poor, who spend a greater proportion of their income on gas and electricity than do the well-off.
The Tories were returned to power in 1992 with a commitment to maintain existing tax levels, but they introduced 22 new taxes. The typical family paid an extra £2,000 a year in 1997 compared with 1992. The Tories may criticise the Chancellor's changes to the married

couples tax allowance as a hidden tax rise, but, after 1992, the Tories themselves reduced the married couple's allowance, costing the average family £500 a year.
The Tories criticise the change to mortgage interest relief at source as a hidden tax, but their reductions in mortgage interest tax relief from 25 to 15 per cent. after 1992 cost an extra £600 per year.
The Tories criticise the increase in road fuel duty as harmful to rural communities, where people are dependent on cars, but it was the Tories who introduced bus deregulation, which greatly reduced rural services, and it was they who raised duties year on year.
The Tories in opposition still display a hypocritical approach to taxation. The Labour party in government has upheld its commitment to create a tax system that is not only fair but seen to be fair. The poorest 20 per cent. of families with children will gain an average of £500 a year.
VAT on domestic fuel will be reduced to 5 per cent.—the lowest level possible. In opposition, it was Labour Members who prevented the Tories from increasing it to 17.5 per cent.
The working families tax credit is an attempt to tackle the unemployment and poverty trap that flourished under the Tories. The tax credit will guarantee that working families earning less than £220 per week will be taken out of income tax liability altogether. It will particularly benefit the 4 million children in Britain who live in households below the poverty line, as will the pledge to increase child benefit by up to £2.50.
Through the implementation of the windfall tax on the privatised utilities, £3.5 billion was taken from the huge profits that went into lining the pockets of Tory fat cats. That will fund the new deal to tackle social exclusion among the young, long-term unemployed, lone parents and people with disabilities. It will also provide funds for the much needed investment in our schools following the maintenance backlogs that grew under the Tories. The Government have provided a total of £2.3 billion in extra funding for education since the election on 1 May.
Changes to national insurance will make British workers more competitive, especially low and middle-income earners. The change in national insurance will make thousands of people in Coventry, South better off.
This is a step on the long road not only to modernise Britain for the years beyond 2000 but to create a fairer and more equitable society.

Mr. David Rendel: The Liberal Democrats believe that the Chancellor has, in general, moved in the right direction in his Budget this year. The problem is that he has not moved far.
During the debate, other hon. Members have had—and will have—an opportunity to comment on the Budget more broadly, but I shall confine my remarks mainly to my spokesmanship area, which is social security. I shall make just one exception on a constituency matter.
On the social security proposals, we welcome the Government's efforts to give some of the poorest in our society the opportunity to find paid employment. We have always welcomed that, and welcome the changes in the Budget that will help it. We welcome the Chancellor's attempts to make work pay. We welcome the fact that take-up of working families tax credit is expected to be higher than the take-up of family credit.
However, the holes in the Government's proposals are unwelcome. As my right hon. Friend the Member for Yeovil (Mr. Ashdown) said on Budget day:
there is still a suspicion that some of the detail is being shaped by political gimmickry rather than by practical good sense."—[Official Report, 17 March 1998; Vol. 308, c. 1124.]
In my speech, I hope to highlight the areas where the Liberal Democrats are pleased that the Government have acted, as well as the dangers that we see in the continuing power of soundbite over policy, for the Budget does all too little for the groups of people who cannot work, or who through individual choice do not work.
I particularly welcome two aspects of the Budget. The first is the long-overdue changes to national insurance contributions. It is undoubtedly helpful, especially to businesses, that the allowances for employee and employer national insurance contributions should be aligned with the allowances for income tax. That is something for which the Liberal Democrats have pressed for some years, and it is all the more welcome for that.
The second change that I particularly welcome will affect many fewer people, and will not be worth all that much to those whom it does affect. Nevertheless, because it embodies an important principle, it is worth highlighting today. The Chancellor has extended the additional personal allowance to women whose husbands are incapacitated. There is no reason why, in the modern world, husbands who care for their disabled wives should receive such an allowance, while wives with disabled husbands do not.
The idea that women suffer no personal financial loss by caring for a disabled husband should have been confined to the 19th century rather than to the 20th and 21st. It would be interesting to know whether the hon. Member for Chingford and Woodford Green (Mr. Duncan Smith) agrees with us on this issue. I may have missed something, but so far all I have heard from the Conservatives on that change is a deafening silence. If the hon. Gentleman wishes to intervene to tell me whether he supports the Government and the Liberal Democrats on that change, I shall give way, as I am interested to know. [Interruption.] I suspect that he has not yet made up his mind, as he now says from a sedentary position that he will write to me later about it.
It has taken a long time for the Labour party to accept the Liberal Democrat position. After all, the change was proposed as an amendment in Standing Committee during consideration of the Finance Bill in 1996. On that occasion, the hon. Member for North Warwickshire (Mr. O'Brien), speaking for the Labour party in opposition, refused to support an amendment tabled by my hon. Friend the Member for Gordon (Mr. Bruce)—despite the support that we now appear to have from the Government—which would have had the same effect as the Chancellor's announcement on Tuesday. The hon. Gentleman said that Labour
would be giving out the wrong signals if we introduced changes in the Finance Bill that assisted spouses of disabled people."—[Official Report, Standing Committee E, 13 February 1996; c. 279–80.]
Assisting the spouses of disabled people would send "the wrong signals". That is not the way to speak or think of some of the most disadvantaged people in our society. I am glad to see from the reaction of hon. Members on

the Government Benches that they tend to agree with us, and not with their spokesman on that occasion. We on the Liberal Democrat Benches are delighted that the Labour party has at last seen the error of its ways.
In contrast, however, there is one other aspect of the Budget on which the Government have, conspicuously, not seen the error of their ways. The abolition of lone parent benefit, due to come into effect in April this year, will mean that payments to current claimants will be frozen, and new claimants will face an immediate cut. What will happen to those who do not want to take paid jobs but who want instead to stay at home to look after their children? Will they face poverty, hunger, no opportunity and no hope? The Liberal Democrats have opposed the cuts in lone parent premium, for we realise that some lone parents want to stay at home to look after their children, but under this Budget, some lone parents do not do paid work, so do not get anything.
How totally illogical to break the bounds of Conservative tax policy and introduce an entirely new allowance for mothers married to an incapacitated husband, while cutting lone parent benefits purely on the excuse that there was a rigid and unbreakable pledge to stick to Conservative policy. There is no logic behind that. There is no excuse.
What about pensioners? I may be mistaken, but I do not think I heard the word pass the Chancellor's lips even once during his Budget speech. Labour sings sweet tunes when talking of the need to tackle poverty, but what of the over-80s, who are some of the poorest in our country? Have they been forgotten? Are they unimportant? Are they to be treated merely as having ended their working life? The Liberal Democrats have proposed a £5 premium for the over-80s. It is a targeted policy, well aimed, to help the poorest, including many who are eligible for income support but who, for one reason or another, do not claim it. Pensioners do not work, so in the Budget pensioners do not get anything.
The stress on welfare in work does, however, have welcome advantages for those fortunate enough to be covered by the Chancellor's plans. First, there will be a £1.4 billion cash injection into the working families tax credit. That is welcome. Secondly, the working families tax credit will have a much reduced taper compared with the present system of family credit. That is welcome, too. Thirdly, there will be a welcome tax credit for child care. On that, I am opposed to the view held by the hon. Member for Chingford and Woodford Green. That is one of the few Budget measures for which the Chancellor deserves unreserved praise. However, none of these welcome changes is dependent on the introduction of the working families tax credit; on the contrary, the changes could have been combined with the current system of family credit.
The one advantage that is specific to the working families tax credit is that it is likely to promote a higher take-up among those who qualify than did family credit. In general, a stigma surrounds benefits: people are thought to be failures if they rely on welfare handouts. Liberal Democrats believe that family credit was successful in combating poverty, but acknowledge that some people who may need it have suffered and gone without it because of that stigma.
We hope that working families tax credit will break that stigma by rewarding work and by assisting those who want to stay in employment, but several disadvantages


should be recognised. The devil will be in the detail and in the design of the system. The Chancellor says that couples will have the option of receiving the tax credit through the pay packet or through the Post Office, but we remain unconvinced that that will stop a transfer of resources from the purse to the wallet.
Family credit is paid direct to the mother; working families tax credit will give couples a choice. There will be little difficulty in a family if the man and the woman have a good relationship, and share and understand each other's needs. Whichever partner is chosen to receive the tax credit, the money will be passed to the partner who will spend it on behalf of the family. However, there is a danger that selfish husbands or fathers who do not want to share or to give the tax credit to their wives will refuse to do so. They will say, "Why give my wife the tax credit? She's received family credit for years." They will think that it is time for them to keep hold of the money through their pay packets, so that they have more to spend down at the pub.
Sadly, in the families in which it is most important that the non-working partner receives the money to spend on the family's needs, it is least likely that the non-working partner will have a say in the matter. The opportunity for choice, on which the Chancellor is relying, may be more apparent than real where it is most necessary. Nothing could be more damaging to children.

Mr. Duncan Smith: I am listening carefully to the hon. Gentleman. Is he assuming that if the main breadwinner does not agree, the tax credit will stay in the wage packet instead of going to the non-breadwinner, or does he wish, like me, that the Government would explain the matter?

Mr. Rendel: I was tending to assume that that may happen. I should be delighted if the Government assured us that a detailed mechanism will be introduced to overcome the problem, although it seems clear from the remarks of the Secretary of State that, so far, they have not found such a mechanism. That worries me.
There are other anxieties about the working families tax credit. The Chancellor must ensure that this country does not suffer from the high number of frauds that have occurred in the United States, with employees and employers colluding over the amount of working families tax credit that is due. It would be wise for the Government to study carefully the Canadian Government's experiences with working families tax credit before introducing one. I understand that the Canadian scheme has been withdrawn, mainly because it was a disincentive to work for more people than the ones for whom it was an incentive.
The Institute for Fiscal Studies report, published yesterday, takes the Budget as a whole and shows that, although 1.1 million people will have an increased incentive to work despite still suffering from an average marginal tax rate of 71 per cent., 2.8 million people—more than twice as many—will suffer from a decreased incentive to work. The policy has advantages, so that may not be a reason for not going ahead with the policy, but it must be considered, and the Government have not properly dealt with it. If the figures are accurate and the Government do nothing to address the problem, the working families tax credit, which was intended to boost

their new deal programme, could become the main cause of its failure. Liberal Democrat Members hope that those disadvantages will disappear as further details emerge. We wait with interest.
I must add a further warning about the Budget. The Government are right to introduce a tax credit for child care, but the quality of the child care provided must not be compromised. There should be a recognised standard, such as a kite mark, and such provision should be registered by the Government. The future of our nation's children is too important to allow child care provision to be driven by nothing other than market forces.
On behalf of my Newbury constituents, I want to mention the need for rural public transport to be high on the agenda. The £50 million that the Government have promised is a start, but that is all it is. The Government must ensure that the money is not the end of the matter, and not merely an attempt to appease the countryside marchers; it must be the beginning of much more investment in the infrastructure of rural Britain. I warn the appeasers, if that is what they are, that an appeaser is one who feeds the tiger hoping that it will eat him last.
My hon. Friend the Member for Somerton and Frome (Mr. Heath), whom I am pleased to see in the Chamber, said yesterday that the Budget had bypassed Somerset. We in Newbury know all about bypasses, and some are welcome. But the £50 million for rural transport will be spread thinly if that is all that it receives. I hope that I shall not have to echo my hon. Friend's remarks when the money is allocated, and say that the Budget has also bypassed Newbury—that would not be a welcome bypass.
There are good things in the Budget. Much of it heads in the right direction; indeed, it picks up ideas that have long been part of Liberal Democrat thinking. We welcome that, but where the Chancellor needed to be bold, he was timid, tentative and grudging. Let us hope that the Budget is merely a small first step, and that he will accelerate down that road next year.

Mr. Terry Rooney: The hon. Member for Newbury (Mr. Rendel) mentioned bypasses; my hon. Friend the Member for Shipley (Mr. Leslie) would not forgive me if I failed to say that the Bingley bypass should be included in the roads programme next month.
Before I was elected to the House, I spent 10 years as a welfare rights advice worker. The job gave a great deal of satisfaction, but brought me face to face with an awful lot of misery and pain. Between 1980 and 1986, my case load went through the roof, because I was dealing with the casualties of the previous Government's economic policies: all that they faced was a lifetime on benefit.
In 1986, that started to change. For the next three or four years, I spent my time telling people that they would be worse off if they worked, which was a tragedy for me, for them and for the nation. That is not sound economic policy.

Mr. Gibb: Was that the advice that the hon. Gentleman gave?

Mr. Rooney: If the hon. Gentleman wants to intervene, I shall gladly give way. He does not want to intervene, because, as usual, he does not know what he is talking about.


The Social Security Act 1988, which introduced family credit and changed many rules, compounded the problems. For example, the children of people on family income supplement were entitled to free school meals, but that entitlement was removed under the new family credit. Before the hon. Member for West Chelmsford (Mr. Burns) gets excited, I point out that, yes, there was a notional adjustment in the value of the benefit, but it went out of the window the week after the benefit was introduced, because no account was taken of it. That was a major cost to people on low incomes who moved from unemployment into work. As a result of the way in which local government finances were handled in the 1980s and early 1990s, the price of school meals went up far in excess of inflation year on year. People also face the cost of child care, especially in school holidays. Lone parents with two or three children have enormous costs during the six-week summer holiday and have no assistance whatever.
In 1996–97—the last year of the Conservative Government—725,000 people claimed family credit. That was only 70 per cent. of those entitled. For whatever reason, 30 per cent. of the relatively poor families who are entitled to family credit did not claim it: £400 million was not claimed. It is the children who suffer as a consequence. The beauty of the working families tax credit is that there will be a 100 per cent. take-up, because it will be paid automatically. There may be no stigma attached to family credit, but 300,000 people who were entitled to it did not claim it.
The 725,000 people who received family credit in 1996–97 were getting an average of £57.04 a week. The tragedy is that their average gross wage was £112.81 a week. That is an indictment of the low-wage economy, and shows why we need the national minimum wage that the House voted for last week. Even on that miserable average wage of £112, people were paying £170 a year in tax. They were getting £57 a week from the state in family credit, but they paid £170 a year in tax and a massive £340 in national insurance. That bill will be halved as a result of the changes that the Chancellor has introduced; and quite right, too.
Why do high earners on the top rate of tax need incentives to go to work, whereas unemployed people do not? Why is a 97 per cent. marginal rate of tax for the unemployed valid, but a 40 per cent. tax rate for higher earners is not? That argument is nonsense. There should be incentives across the board, and it is about time they were directed more at poverty than at affluence.
The Labour party manifesto made much of our welfare-to-work proposals. In the 10 months since we came to power, that programme has unfolded. Welfare to work has two fundamental principles: one is that all those who can work should work, and the other is that work should pay.
I am pleased to say that I attended the launch of the new deal for my local authority area on Tuesday morning, when 170 employers turned up. They have signed up to the new deal. Employers and claimants are enthusiastic about it, and everyone will benefit from it. It was a superb event.
Welfare to work, the new deal and the national minimum wage interlock with the measures taken in the Budget to get people back to work. The aim of those

measures is to bring dignity and respect to those families, and to provide them with an income that is commensurate with their family needs and circumstances, rather than the misery pay that they received during the Tory years.
I shall comment on the Chancellor's tax credit scheme for the disabled. For many years, disabled people in work have received the disability working allowance. The system is an absolute disgrace, because the allowance is claimed by 13,400 people—the vast majority of disabled people do not know about it, and even those who do have difficulties because it is complex, so they do not bother to claim. Under the new deal, there will be £185 million for people with disabilities who want to work. They should be allowed to work, and the money should be available to support them.
Child benefit has been frozen. The most valuable support that we can give to families with children has always been child benefit. That is why it was introduced in the mid-1970s, when we did away with the old child tax allowances and the family allowance. It is a tribute to the noble Baroness Castle. I hope that the increase in child benefit this year and next year will continue year on year. It will do more than anything else to relieve child poverty. That increase is the most radical aspect of the Budget.
I welcome the Budget and am very glad to support it.

Mr. John MacGregor: Given the time constraints, I shall be selective and shall not go over areas that have been reasonably well discussed already. However, I should just like to say that I have not yet been able to get my mind round some of the complexities of the working families tax credit scheme and of the Martin Taylor report. Many of us have wrestled with these issues for some years, and we recognise that the objectives of the proposals are desirable. However, I have a hunch that they have been put together in haste and may be very complex. There may be a host of snags, not least the difficulties that small businesses will have trying to administer the scheme.
I should like to ask the Paymaster General about the relationship between the working families tax credit scheme and housing benefit and council tax benefit. How will it work in the round?
I want to concentrate on rural areas, which have been particularly badly hit by the Government. The rural pensioner has been badly affected by the Budget. We must also consider this year's council tax, because it is part of the tax system and has an impact on rural dwellers. In Norfolk, because of the switch of Government grant from rural to urban areas, the council tax will increase by 17 per cent. this year and will be accompanied by a considerable decline in services.
The increase in petrol tax will have a particularly adverse effect on rural dwellers, and I am strongly opposed to the Chancellor's proposal. This Budget introduced a 9.2 per cent. increase in petrol tax—6 per cent. in real terms. That increase comes after a hike in petrol taxes last year, when they were doubled. It is equivalent to 1p on income tax.
The car is often a necessity in rural areas, not least for people on lower incomes who use it to get to work. It is not possible to provide the multiplicity of public transport that can be provided in urban areas. The impact of the


increase in rural areas will be severe, particularly on rural pensioners. The £50 million for rural transport schemes is merely a sop and will make little difference compared with the extra costs that will be incurred in rural areas. The Times comments today that for the three quarters of rural areas without a bus service, this is equivalent to little more than a wheel nut for each recipient.
Given the modern technology used in cars, their impact on the environment is much less than it was five years ago when we began the process of increasing petrol taxes above indexation.
I agree with the hon. Member for Newbury (Mr. Rendel) that the Chancellor hardly mentioned pensioners in his Budget speech. The fuel payment given to pensioners this year does not compensate for the increase in council tax and in motoring costs that pensioners will face as a result of the Budget. The rural dweller will be worse off. Yesterday, reference was made to the fact that BP has reduced petrol prices in rural areas. That reduction is because of the current lower oil prices, but they could go up again just as quickly, whereas the imposition of this extra tax is permanent. The measure is a retrograde step.
Pensioners were squeezed by last year's attacks on pension funds. Many of them suffered the loss of insurance relief on medical schemes. Agriculture and allied trades, including farm machinery companies, face serious problems because of the constant strengthening of the pound and the consequent impact on the green pound. As a result, a considerable number of people in rural areas have been made redundant. I do not think that the Budget has given rural areas a good deal, especially when combined with the council tax. That is the point that I want to stress most.
May I make a positive point to the Paymaster General about rural areas? I believe that the time has come to consider exempting church repairs and maintenance from value added tax. It has become increasingly difficult for churches, particularly listed churches, to carry out repairs and maintenance. In my constituency, many churches have tried to raise enormous sums, only to find that VAT is charged on top of that.
I very much welcome the reductions in income tax, but one consequence of those reductions is a reduction in the tax relief gained through covenant payments. That means a reduction in income. The European Parliament recently asked the Commission to improve the fiscal position of charities in relation to VAT, and I support its view. Only a modest measure would be required: I believe that, according to the most recent figures, it would cost about £25 million in tax forgone. My bishop, the bishop of Norwich, has spoken about the subject at length in the other place. I personally think that such a relief would be welcomed by many rural communities, and would be very important to our heritage.
I have mentioned rural transport. Unfortunately, I do not have time to develop my argument tonight, but I will say that we should bear in mind the additional cost to motorists. Eighty per cent. of the cost of every gallon or litre of petrol will now go in tax, and the cost to industry will continue. However much effort we devote to switching freight from road to rail—which I entirely support—the vast majority of freight will continue to be transported by road. The cost of that will be passed on to

the consumer. At this point, I must declare an interest, as a non-executive director of Unigate, which owns a transport company.
More should be spent on the roads programme. I deeply regret the cuts in that programme, and I believe that the Government will come to regret them as well, not just for reasons of economic competitiveness but because of the impact on travellers everywhere. However much is invested in public transport, in non-metropolitan areas that investment will not displace the need for increased investment in roads. I hope that there will be other occasions for me to develop that theme. I think that soon, for economic, if for no other, reasons, the Government will be forced to find more money for road maintenance, road improvements and bypasses.
I greatly welcome the Government's reversal on the £50,000 limit for tax-exempt special savings accounts and personal equity plans. I am glad that they have responded to pressure—although, of course, we should not be too grateful, because the Government should never have suggested the limit in the first place. However, I am still worried. I note that today the Cabinet were supposed to be discussing compulsory pensions, second pensions, and so forth. I fear that the relationship with pensions has not been thought through sufficiently; I feel that the Government ought to concentrate on long-term savings.
When I heard what the Chancellor said about the savings scheme, I thought that his announcement about capital gains tax would be very welcome. I have long advocated a tapering system. When I looked at the details, however, I found that non-business assets would be treated much worse than they are under the present indexation system. If they are held for any length of time, and if inflation is higher than 2.5 per cent., there will hardly ever be any benefit in transferring to the proposed new system. That will not encourage long-term savings. Indeed, if inflation is higher than 3.5 per cent., there will never be any benefit. There will no benefit for 10 years, and no benefit thereafter. The Chancellor has missed a great opportunity to encourage long-term savings, but that could be put right by a change in some of the systems.
I know exactly what the Paymaster General is facing, because it was given away in one of the detailed notes. The tapering system has been heavily constrained by the Inland Revenue, because it does not want to lose any tax revenue. However, if the Government intend to encourage long-term savings they ought to introduce a different tapering system.
I must end my speech, because of the restriction on time. Let me finally deal with the overall public expenditure position. There is no doubt that the Government have been hugely helped by the economic legacy that has been left to them—tax buoyancy, falling unemployment, the contribution to the European Union, and so forth. Even so, however, they have increased health expenditure by less than the Conservatives have in recent years, and by less than we did throughout our time in government. It is time that Labour Members started to look at the figures, and to realise that. Moreover, the Government propose to devote less to capital expenditure over the next three years than was in our capital expenditure programmes. I do not think that their priorities are right, although I welcome the constraints.
Above all, I want to make it clear—

Mr. Deputy Speaker: Order. I am afraid that the right hon. Gentleman has run out of time.

Mr. Malcolm Wicks: I welcome this bold and radical Budget. I think that, in the social sphere, it will be remembered for what it says about employment and the worth of employment, and for what it says about families with children. It certainly enables me, in my Croydon constituency office, to give a better answer than I have been able to give before to mothers—some of them lone mothers—who tell me that they want to resume their careers, but that, because of child care costs, it would be monetary madness for them to do so.
The new child care credit is a major step forward, and, in some years' time, the use of credits may be seen as a great innovation which could be spread further afield. Perhaps there could be a new carers credit, for example. The provision shows that we can make the tax system more progressive, and make it serve social purposes.
I do not want to spend my limited time heaping praise on the Front Bench, however. My ministerial colleagues are easily embarrassed. Instead, I shall reflect rather more generally on three aspects of the Budget: work and the family, child benefit, and the future of national insurance.
I believe that, in retrospect, the 20th century will be seen very much as a century for women, not only in terms of civic and political gains but in terms of social and economic gains. As we approach the end of the century, women's employment patterns—with, admittedly, some significant qualifications—are becoming increasingly more like those of men, and the Budget, in a sense, institutionalises and encourages some of those developments.
The early decades of the next century, however, must deal with an even more important question. How can we achieve a better balance in the lives of both men and women—both fathers and mothers—between the world of work and the world of family, especially in relation to children? That has policy implications. I would guess that many mothers and fathers would dearly love the opportunity to spend more time at home caring for their children when they are tiny—just a few months or a few years old. New fathers, as well as mothers, will increasingly express that view.
There are implications for the income support system. We should make it clear that, however important the welfare-to-work policy is, those with children under five have an absolute right to stay at home and look after them. Perhaps we should go even further than the Budget in giving an under-fives income support premium to make that possible.
For parents in general, we should perhaps consider a parental care credit. The Budget says that those with more than one child can have up to £105 a week as a credit to help with child care costs. That is right, but I think that, given the theme of choice between work and family, we should match the sum with incentives, or at least encouragement, for parents who want to stay at home and look after their children. Sweden is a world leader in terms of parental leave. I welcome the development of a new work ethic in Britain, but we need to encourage the family and child ethic more strongly if we are to get the balance right between the social and economic spheres—between the world of the home and the world of work.
The hon. Member for Newbury (Mr. Rendel), the Liberal Democrat spokesman, was right to warn us about issues of quality of child care. There will be a great

growth in child care. Some people will view it as a way in which to maximise profits. I do not want child care policy over the next 20 years to be driven by cases of abuse and sheer bad quality.
In a sense, we think that child care is about adults: the working mother, the working father, the politician, the policy maker. Strangely enough, it should be about the child and the needs of that child. Let us hear more about the child in this debate. Let us talk not just about quantity, but about quality.
I welcome the child benefit increase. It is a radical move. It is pro-families and a major development. I want to see more of it. I should like, in particular, a discussion on whether we should weight child benefit increases towards the youngest children—those under five; the poorest families tend to have the youngest children because of employment patterns. We should examine that.
I am pleased that the Treasury has not rushed into taxing child benefit. We should consider that rigorously and cautiously. Whose income do we tax? We say that child benefit is for mothers. Do we tax mothers? What about independent taxation, if we say, "No, we will tax the higher-paid parent"? It is an important issue. How would we do it if people assessed their own tax?
What about cohabitation? More of our children are being brought up by parents who choose—and have the right to choose—to cohabit rather than to get married. I do not believe that the tax benefit system should discriminate in favour of marriage, but it would be absurd if it ignored cohabitation and discriminated against marriage in taxing child benefit. In terms of equity and justice, I am not sure about saying to higher tax-rated single people and childless couples, "No, we are not going to increase tax on you, but we are for those who have children." That is not a pro-family policy. We should consider it with some caution.
There are some interesting straws in the wind in terms of what is being done to the lower rates of national insurance. I understand the case for that in terms of work incentives, but does it break the link between what we pay in and draw out, and what are the implications? Is merging the Contributions Agency with the Inland Revenue simply a bureaucratic measure, or does it indicate something far more substantive? We need a proper debate about that.
Some people—the economists and those who look at these matters technically—say that national insurance is now simply another form of income tax. I do not believe that that is right. There is a strong argument for a renaissance in social insurance. Many of the issues that confront modern Britain, such as the costs of long-term care for the frail elderly, can be tackled only through social insurance. They cannot be tackled through private insurance.
Let us, therefore, have a debate about the future of the national insurance scheme and let us be wary of people who say, "No. It is simply tax. Let us merge it with income tax." Social insurance is more important than that. The age-old principle of contributing to the community chest when in plenty, and drawing out when in need is a thoroughly modern concept for 21st century Britain.

Mrs. Jacqui Lait: I will not follow the hon. Member for Croydon, North (Mr. Wicks) by concentrating entirely on social security issues, but I begin


by saying how much I support the principle of getting people into work. The Conservative Government did much to encourage them. I hope that the Government's changes will not be subverted by some of the adverse effects that I expect will come about.
I should like to concentrate on the child care credit and to ask the Paymaster General to answer some questions it; many questions have arisen in my mind. My hon. Friend the Member for Chingford and Woodford Green (Mr. Duncan Smith) produced some calculations. Families who earn up to £14,000 would receive child care benefit of approximately £40 a week. On that basis, he suggested a ballpark cost of £4 billion; my calculation is a bit higher.
The Prime Minister and the Secretary of State for Social Security and Minister for Women have said that the benefit would extend to families with incomes of £30,000. For those who are on incomes of between £15,000 and £30,000, there will be, again according to my calculation, a £20 a week average benefit for child care, which comes to £1.5 billion, on top of the £4 billion—if that figure is right; as I have said, I think that it is on the low side. Will the Paymaster General give some indication whether those calculations are right? I welcome the fact that it will take two years to introduce that credit, because I suspect that it will take the Treasury two years to calculate it all.
Because the Government have hyped that benefit, many families expect 70 per cent. of £100 or £150, depending on the number of children they have, somehow to emerge in their pay packets. Most of them do not realise the effect of the 55 per cent. taper and many will be disappointed when they realise how little they will receive. I suspect that they are likely to feel cheated.
As people are rational, they will organise their affairs in such a way as to maximise the amount of child care credit that they will be able to claim. That will increase the cost yet further. Will the Treasury tell me whether that has been calculated in its estimates? Indeed, child carers will also provide to the sum that is the maximum that they can receive from the tax system. We saw it happen with rest care homes. We will see it happen with child care, too. Has the Treasury examined that?
This is a small, but crucial point. The credit is not being introduced for two years. One of the reasons for that is that it will take a long time to increase the child care provision. Is the Paymaster General aware that the loan guarantee scheme is not available to people who wish to set up nursery schools providing a curriculum? Department of Trade and Industry rules specifically exempt those who set up schools providing a curriculum. That includes nursery schools. A change there would be one way in which to increase the amount of provision. I hope that he will consider making such a change.
The hon. Member for Croydon, North made many of the points that are crucial in relation to the interrelationship between child benefit and income tax. I will not go any further, other than to say that I support his comments about the disincentive effect of taxing child benefit. It would be absurd to tax what is, in effect, a tax relief.
My right hon. Friend the Member for South Norfolk (Mr. MacGregor) referred to the effect of the petrol increases. I will not go down that particular line, but I point out that, for many pensioners, the move to public transport, if it comes about, will involve even greater costs

than people envisage. For example, those who are a bit dodgy on their pins will need porters in railway stations. They will need conductors on buses. In pedestrianised areas, they will need buggies to get around. All that costs money—additional money. I do not think that most people realise that when they talk about providing extra public transport.
I consulted businesses in Beckenham about what they wanted from the Budget. Most of them wanted business burdens to be reduced. There are few signs that the Budget will do that. Administrative burdens have gone up. We have made much of the effects of the working families tax credit. The help for small businesses, particularly the new Inland Revenue payroll offer, will send shivers down the spine of most new businesses, I suspect. It comes in the category of, "I'm from the Government. I am here to help." What will be the effect on companies that offer payroll services? In effect, will this be unpaid—and therefore unfair—competition and put those companies out of business?
I understand that the Chancellor said that he wants to reduce red tape. There was not much evidence of that. I am a member of the Deregulation Committee and I am not impressed by the volume of legislation that is coming through for us to deregulate. I hope that we will see a lot more coming through if the Government truly wish to reduce the burdens on business.
In my opinion, the big issue that has been entirely glossed over and in which I have taken a long-standing interest is smuggling and bootlegging. Those of us who have been on many long holidays buying wine in France know all about smuggling and bootlegging. We are also learning about the effect of the tobacco tax on smuggling and bootlegging. I notice from the Red Book that, despite the increases in this Budget and the previous Budget, the Treasury is expecting only a small increase in excise this year and that is due to fuel prices. All those painful increases in alcohol and tobacco taxes are having no effect. Meanwhile, the industry of smuggling and bootlegging is expanding exponentially.
Dave West, who runs the tobacco warehouse at Adinkerke—I thank the Tobacco Alliance for arranging my visit to that warehouse—has a turnover of £107 million on tobacco alone. Since December last year, the amount of cigarettes sold has increased from 5 per cent. of sales to 50 per cent. An increase of 20 per cent. on cigarettes will mean that that percentage will go up. The percentage for handrolling tobacco has not gone down.
We are seeing the effects of those sales nationally. They are undermining the rule of law and damaging the health of the nation. In Ashford, young drinkers were disrupting the town centre because they had access to cheap French beer. In Guildford, French beer caused youngsters to damage the cathedral precincts. In Beckenham, I have had complaints about a smaller shop selling duty-free alcohol. Sales of handrolling tobacco papers have increased by 63 per cent. since 1990. In Calais, there are 66 warehouses providing cheap tobacco and alcohol.
The big city gangs are now involved, and there is evidence of firearms being used in the Kent area. Protection rackets are emerging, and the police are investigating links to terrorism.


In January 1995, the current Financial Secretary to the Treasury, then in opposition, said:
The illegal entry of alcohol cannot be regulated by our health policies or controlled by our legitimate methods of dealing with alcohol consumption."—[Official Report, 23 January 1995; Vol. 253, c. 65.]
We have a French alcohol tax, a Belgian tobacco tax and we are not in control of our own excise duty tax.

Mr. Deputy Speaker (Mr. Michael Lord): Order. The hon. Lady has used up her time.

Yvette Cooper: I welcome the Budget. It is the first Budget I can remember being described as a Budget for children, a Budget for women and a Budget for poor families. According to the Institute of Fiscal Studies, not one Budget under John Major treated poor families better than rich families.
The Conservatives presided over a growth in poverty, particularly child poverty—that is the most shocking. One in three children are being brought up in poverty. What did the Conservatives do? They stood by while child benefit fell from 4.5 per cent. of average earnings to 3 per cent. of average earnings. In response, the Labour Government have put up child benefit by the biggest real increase since 1978. As a result of the Budget, we have given families—some of the poorest families in the country—an extra £500 a year on average. I wish that the Opposition would welcome that because it is one of the most important things that we can do to tackle child poverty.
It is worth making it clear why the Government can do that and why they can make these changes. We can do so because the Chancellor has already taken action to sort out public finances, which were in a mess at the time of the election. Under John Major, national debt doubled—

Mr. David Ruffley: Will the hon. Lady give way?

Yvette Cooper: I will give way if the hon. Gentleman will comment on that.

Mr. Ruffley: Will the hon. Lady concede that, in the Red Books published by my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke), it was projected that the PSBR would be zero at the turn of the century?

Mr. Deputy Speaker: Order. Before the hon. Lady replies, I remind her that we do not use proper names but refer to hon. Members by their constituencies.

Yvette Cooper: The PSBR projections of the right hon. and learned Member for Rushcliffe (Mr. Clarke) were remarkably inaccurate every time. Previous Red Books show that, over the past four years, the total PSBR was about £60 billion higher than it should have been according to the previous Government's projections. The projections of the new Labour Government have been surpassed by the tough actions taken by the Chancellor to sort out the problem of public finance. Last year, the public finances were £23 billion in the red. Now, we are

looking at only £4 billion and that is because of the tough action taken by the Government. It is worth remembering the position of the Opposition on the Finance Bill.

Mr. Ruffley: Will the hon. Lady concede that all the tough but necessary action and tax increases designed to bring down the deficit under the Budgets of my right hon. and learned Friend the Member for Rushcliffe were opposed by the Labour party? What does she have to say about that?

Yvette Cooper: The hon. Gentleman should look at the report of the Finance Bill Committee last year. His party opposed all the significant measures to sort out the public finances in the previous Budget. That makes my point. Had the Conservatives continued in office, they would have been significantly more in the red than we are today. They opposed the windfall tax and all the measures that my right hon. Friend the Chancellor took to cut borrowing. They opposed the changes to advance corporation tax and the changes to sort out the state of the public finances.
A Conservative Government would not have been able to increase child benefit or to introduce the child care tax credit. They would not have been able to give help to low-income working families. It is not so much that they did not want to, but that they could not afford to because their borrowing would have been considerably higher.
We now have the chance to make work pay. We no longer need to tolerate the absurdly high marginal tax rates faced by far too many people on low incomes. For every extra pound earned by a dinner lady on a salary of £63 a week, more than a pound would be taken away because of the way in which national insurance contributions work. That is ludicrous and it is a good reason for getting rid of the 2 per cent. entry fee for national insurance. It is also a good reason for introducing the working families tax credit. The working families tax credit is not only more generous, but it changes the tapers. It changes the rate at which money is taken away from people. Also, people will no longer find that tax is being taken on one hand while benefits are being given with the other.

Mr. Gibb: Is not one of the consequences of the working families tax credit the fact that it will extend the dependency culture by reducing the tapers? As a result of the Budget, 400,000 more families in this country will be in receipt of benefit.

Yvette Cooper: There will be 400,000 more families in receipt of extra help to make them better off, so that they will have a guaranteed minimum income of £180 per week. I think that that is worth while, and I am ashamed that the hon. Gentleman does not.
The Budget contains other measures—it is not simply about making people better off once they are in work, but about helping them into work. One of the Budget's most significant provisions, which the House should not underestimate, extends the benefits of the new deal to partners of the unemployed.
As the new deal was being introduced in my constituency, our local youth service was asked to conduct a focus group of some 18 to 25-year-olds who might be eligible to participate in it to discover their attitudes to


work, training, education and the Employment Service. The results were fascinating—until one looked at the small print, and discovered that most of the women in those groups, because they were not receiving the jobseeker's allowance, were not eligible to participate in the new deal. The youth service had included them in the group because they were actively seeking work and wanted jobs.
For too long, the benefit system has trapped women who want to work by denying them access to training, education and help—it has dismissed and ignored them. The Budget's equal treatment of women is an extremely important change.
As my right hon. Friend the Secretary of State for Social Security and Minister for Women said, another significant feature of the Budget is the £10 million for a pilot programme that will provide education and training for lone parents. Although it does not look like much money, it could prove to be a significant factor in raising children out of poverty.
Skills and qualifications are a greater factor for lone parents in determining whether they work than they are for other people. Statistics show that 87 per cent. of people with degrees are in work, and that 88 per cent. of lone mothers with degrees are in work. At the other end of the skills spectrum, 52 per cent. of people with no qualifications are in work, and 47 per cent. of mothers with no qualifications are in work. However, only 22 per cent. of lone parents with no qualifications are in work.
Qualification levels are, therefore, immensely important in determining whether lone parents work. Child care—extremely important though it is—is not the only factor in lone parents' ability to work. We must also give women an opportunity to gain the education and skills that they need—not only to get their first job, but to get their next job, and the one after that.
This morning, the Employment Sub-Committee took evidence from various groups working in child care and with lone mothers. They all agreed that the most important next step in the new deal for lone parents is to improve availability of child care and education.
The Budget represents an important new deal for women—it is a very important Budget for women. By my calculations—on the basis of calculations in the Red Book—the Budget, on average, will benefit women five times more than it will benefit men. That is not a sexist point—

Mr. Ruffley: Yes, it is.

Yvette Cooper: It is a reflection of the fact that women are more likely to be in poverty, and that women are more likely to be looking after children in poverty. Women are the ones who are denied child care and the chance to work, and they are the ones who are lower paid once they are in work. Conservative Members do not realise that fact, which is testament to the fact that, for the past 18 years, they have done so little for women and children in poverty in the United Kingdom.
The Budget is remedying the inaction of the past 18 years. It is part of Labour's commitment to women, to children and to families in poverty. It is a chance to start turning things round.

Mr. Christopher Fraser: Although—as we all know—the Government inherited the strongest economy in a generation, Labour's first Budget, last year, raised taxes. Let us not forget that that Budget raised 17 taxes, or that a typical family is now £800 per year worse off because of that Budget. The increases were imposed despite the Labour party's pledge in the general election campaign that there would be no tax increases.
Last year's Budget will be remembered as one that shook to the core all those who were saving for their retirement. The raid on company pension funds hit workers, shareholders and consumers alike, and was regarded as a betrayal by the prudent and the responsible. We now learn from the Red Book that, for 1998, the Chancellor forecasts a sharp drop in personal savings. That was hardly surprising after he placed a tax on savings and pensions.
We all accept that one way in which to control consumer spending is to raise interest rates—which is what the Chancellor and the Bank of England have done. However, the effect of higher interest rates has been to raise the value of the pound. Our exports have become more expensive, and so—as is demonstrated by the fall in manufacturing output for five consecutive months—exporters and manufacturers are heading towards recession.
As if that were not bad enough, businesses now face new taxes, to the tune of—according to the Confederation of British Industry—£22 billion. Now the Chancellor wants businesses to cope with the administration and arbitration of the new working families tax credit scheme. Businesses have to take over where the Benefits Agency will no longer be responsible.
In my work with the Small Business Bureau, I have become only too well aware of how worried small businesses are about the future. They prospered under a Conservative Government, but look to the future with some hesitation. Small businesses will judge the Budget's success on whether it enables the Bank of England to maintain current interest rates, or—dare I say it—even to cut them. They expected the Chancellor to unveil measures to satisfy the Bank of England that no more interest rate rises would be necessary.
On the evidence, has the Chancellor done enough to encourage the Monetary Policy Committee to hold rates? We shall see. For how long will the Chancellor be able to continue shrugging his shoulders and blaming the Bank of England for the difficulties that high interest rates are causing to the wealth-creating sector?
Businesses employing high-paid workers will suffer also from the reform of national insurance. How will that impact on their productivity and job security?
The Budget's success in my constituency of Mid-Dorset and North Poole will be judged not only on what it has done to British business, but on how it affects married couples, people living in the rural parts of my constituency and pensioners. Many of the people in those groups were looking forward to the much-talked-about 10p starting tax rate, yet—two Budgets into this Parliament—there is still no sign of it, and no date when it might apply.
My constituents will be entitled to feel that the Chancellor has let them down. The Labour party will have to learn the difference between being in opposition—


when it promised the earth—and the hard world of government, in which it is held to its promises. Indeed, the never-never is a feature of the Chancellor's policies—he is living on tick. He has, for example, introduced an immediate rise in fuel duty, which will not be offset by proposals that are purported to benefit my constituents until autumn 1998 or, in some instances, until next year.
I welcome, of course, the Chancellor of the Exchequer's recognition that the tax and benefit system has disadvantaged those with children—but what has he done to deal with the disadvantages of those who want to stay at home to look after their own children? He has created a huge disincentive for mothers in two-parent families to stay at home, yet he has created an entirely opposite incentive for lone parents.
The Chancellor—by introducing the 12-week linking period—is undermining benefit cuts to lone parents, maintaining lone parents' benefits at current levels and continuing the same culture of dependency. He has also created an incentive for lone parents to take short-term work, so that they will not lose their entitlement to higher benefit rates. Therefore, the new deal for lone parents is already struggling. Those added incentives will further prejudice lone parents' return to full-time work.
What has the Chancellor done to encourage stable married life? How does he reconcile a reduction in the married couples allowance with his statement that
Families are the bedrock of a stable and healthy society"?—[Official Report, 17 March 1998; Vol. 308, c. 1106.]
How can the Chancellor's pledge that the Government will reduce welfare spending be reconciled with the fact that the Budget has increased the cost of welfare in the United Kingdom? He can justify it by tinkering, tapering and sleight-of-hand. The indications are that—because of the Chancellor's reforms—welfare spending will rise by £10 billion over the life of this Parliament.
Who will pay for that spending? The taxpayer will pay. The fact is that—because of this Budget alone—250,000 families will face higher marginal tax rates. Moreover, they face a third increase in the cost of petrol since May, when Labour won the general election. In rural constituencies such as mine, and that of my right hon. Friend the Member for South Norfolk (Mr. MacGregor), such price increases are crippling.
As a sweetener, we were promised that £50 million would be spent on rural transport. That equates to £1 per person spread over three years. How can that make a difference to the country? How much of it will Dorset enjoy?
The huge increase in duty on fuel is Treasury motivated and represents a further tax on the countryside. Has the Chancellor learnt nothing from the strength of feeling demonstrated by the countryside march recently when 250,000 country people filled the streets of London seeking better recognition of their problems?
How do I answer the pensioners in mid-Dorset who have contacted me in the past few days? They have received no additional help from the Budget, yet they will have to cope with the huge increase in fuel prices. Many of them cannot live without a car, living where they do, and must somehow make their pensions stretch further to cover the increase.
It is cold comfort for them that at some stage, £50 million will be spent on community transport projects that have yet to be defined. It is also cold comfort for them that the smallest and cleanest cars will attract a lower rate of road tax. Many of them are still driving old faithfuls—cars that they have had for some time which do not benefit from the latest technology.
During the election campaign, the Chancellor told pensioners:
All Labour's proposals will protect and improve the quality of life of pensioners.
After 10 months in government, Labour has not fulfilled that promise. Pensioners face increased costs and lower private pensions following the abolition of advance corporation tax. Many of them pay more in council tax, thanks to the extravagance of Labour-controlled local authorities and, in Dorset, the equally damaging Liberal Democrat councils.
Perhaps media reports are accurate when they tell us that the Prime Minister intervened to soften the blow of some of the Chancellor's proposals—but what did he do? He spoke to the Chancellor—but for whom? Was it for industry, the middle-income taxpayer, the stay-at-home mother and the pensioner? I suggest that it was not.
The success of the Budget, which in many ways is better than I had expected, hangs on future growth, yet we still have higher interest rates and we are soon to have a minimum wage. I wonder what the impact will be on the golden economic legacy that the Chancellor has inherited and to which many of my hon. Friends have referred.
The Chancellor should remember that the Budgets that are cheered the loudest are often regretted the longest. I fear that he will live to regret a significant part of the Budget that he presented on Tuesday and that the country will rue the day that it was announced.

Ms Ruth Kelly: I am grateful for the opportunity to speak in this important debate. A Liberal Democrat Member described the Budget as timid. I disagree. On Tuesday, we witnessed one of the most radical shake-ups of the welfare state, not just in a generation, but perhaps since the war. Just 50 years ago, Beveridge set out to conquer the five evils afflicting our society: want, disease, ignorance, idleness and squalor. Looking back in 50 years' time, we may say that the past 12 months have seen the first real attempt to rebuild the edifices of the welfare state which had gradually been eroded by 18 years of Tory rule.
In May 1997, we inherited an economy in which one in five families of working age had no one in work, one in three children lived in poverty and inequality was as great as it had been a century earlier. When my right hon. Friend the Prime Minister assumed the mantle of government, he said that the new Labour Government should be judged on its success in narrowing inequality, alleviating poverty and creating a more just society. This Budget is an important step towards doing just that.
Last July, my right hon. Friend the Chancellor introduced the first pillar of reform—the new deal for the unemployed, a £3.5 billion programme to put young and long-term unemployed people back into work. The Budget represents the second pillar of reform to attain


those aims—the establishment of the principle that work should pay and the introduction of the new working families tax credit, which is an assault on in-work poverty and a measure for families with children.
I want to consider the detail of the new working families tax credit, a measure which will ensure that lower and middle-income working families with children keep more of what they earn. It will ensure that no family earning less than £220 a week will pay any tax at all and any family with a full-time worker will be guaranteed a minimum income of £180 a week. It represents a radical change and ensures that the Budget genuinely helps the poor and those with children.
Not everyone agrees, however. Opponents of the tax credit argued before it was introduced that it would do nothing for the poor. Indeed, only a week ago the right hon. Member for Hitchin and Harpenden (Mr. Lilley), the shadow Chancellor, issued a press release saying,
Changing family credit into a Working Families Tax Credit will redistribute income between men and women without altering the household income by a single penny.
That has definitively been shown to be untrue. The Institute of Fiscal Studies argued that it was
a Budget for lower-income families with children…It has been a long time coming, but this is a genuinely redistributive Budget.
I am delighted to be able to tell my constituents in Bolton, West that a couple earning £200 a week—a typical starter wage for someone moving off unemployment and into work—will be £23 a week better off as a result of the Budget and that, on average, families with children will gain about £250 a year.
Let me also consider some of the arguments raised by the hon. Member for Chingford and Woodford Green (Mr. Duncan Smith). His main point was that the working families tax credit would tend to take money out of the purse and put it into the wallet, and that a tax credit would mean that the money would be paid to the working man, whereas a benefit paid to the mother would be more likely to help children. I disagree. I was pleased to note that the Budget did not shift the balance significantly away from the woman, as the shadow Chancellor recently suggested. Indeed, under the new system, families will be able to elect to whom the payment is made—and, of course, it will be more generous.
The shadow Chancellor argued that a new tax credit could put additional burdens on business. Again, that is not true. Under the new system, the Inland Revenue will merely issue a different tax code to the employee based on family income. That will involve no hassle, no intrusion into privacy and no stigma.
The hon. Member for Chingford and Woodford Green mentioned the experience in the United States and Canada. I am pleased to be able to respond to some of the points that he raised. The experience in Canada, which was discussed in the recent Joseph Rowntree Foundation report, is very different from the experience that we shall have in Britain as a result of the working families tax credit. The report argues that such a scheme was not successful in Canada because the culture there did not value work above unemployment and society did not want to use the system to discriminate in favour of people who wanted to work their way out of poverty and into better career opportunities.
In respect of the United States, only yesterday, Jeffrey Liebman, a respected United States public policy expert, wrote in the Financial Times:
The working families tax credit combines the best features of the UK's family credit and the United States' Earned Income Tax Credit. In replacing the family credit with the new tax credit, the Government has ensured that the reform will be accomplished without abandoning independent taxation of spouses or the payment of benefit at frequent intervals through the year and without reducing the share of household resources controlled by women.
The United States has had 23 years of experience with tax-based work credits which shows that such programmes can have important benefits. Recent research there indicates that the earned income tax credit offset almost one third of the rise in inequality that occurred in the United States in the past 20 years. Moreover, the proportion of lone parents who work increased from 73.7 to 82.1 per cent. since 1993, when President Clinton included a large increase in the earned income tax credit in his first Budget.
I also do not agree that paying money through the tax system will fail to reduce the stigma associated with family credit. The working families tax credit is likely to have important psychological benefits, being resented less by taxpayers and by the recipients, who prefer to have a smaller amount withdrawn from their pay packet than to claim benefit. By reducing the associated feelings of dependency and cynicism, the measure is likely to increase take-up, further alleviating in-work poverty.
Another drawback of the old family credit system is that it runs together with other means-tested benefits such as housing benefit and council tax benefit, which taper off quickly as incomes rise, as the right hon. Member for South Norfolk (Mr. MacGregor) pointed out. As a result, some families are trapped in poverty. Some find themselves in the scandalous situation of losing more than a pound in benefit for every extra pound that they earn. The poverty trap is aggravated by the low starting rate of tax, with 45 per cent. of people on family credit paying tax as well.
In addition to being more generous than the old family credit system, the new working families tax credit means that families will keep more of the money that they earn. People can now earn up to £90 before losing benefit, and then they lose it at a slower rate. The amount of benefit withdrawn from working families as income increases will reduce from 70 per cent. with family credit to 55 per cent. under the new system. Even taking the interaction of the new tax credit with other means-tested benefits into account, once it is in place only 250,000 families will lose more than 70p in the pound for every extra hour worked, compared with almost 750,000 at the moment. That is good for work incentives, encouraging people to work longer or to get better-paid jobs. The working families tax credit will particularly help women, creating opportunities for those who had previously been barred from taking them by the lack of high-quality available child care. The child care tax credit will meet up to 70 per cent. of child care costs, up to a limit of £100 for one child or £150 for two or more.
Conservative Members have said that this is a political Budget because we are helping single parents and those in poverty. I agree. There is a political motive. We have to attack in-work poverty. We have to get people back into jobs and we have to open up opportunities—

Mr. Deputy Speaker: Order. The hon. Lady has used up her time.

Mr. John Swinney: I am grateful for the opportunity to speak in this debate. Welfare has dominated the debate so far. I welcome the Chancellor's attempts to attack the poverty and benefit trap that has affected the lives and circumstances of many people. There are many details in the proposals. As some positive action is taken, further anomalies will be created. It is important to watch the detail of how the proposals are formulated to ensure that progress is made on the Chancellor's aims.
The consequences of raising the entry point for employers' national insurance contributions have been mentioned. I am concerned that the changes could lead to an increase in part-time employment, particularly after the introduction of the national minimum wage. I welcome the increase in child benefit. We await the publication of the Green Paper to find out how the measures announced on Tuesday fit in with the Government's other proposals on welfare.
I should like to reflect on the effects of the Budget on Scotland and on the people of my large rural constituency. It did not properly address the economic circumstances in Scotland and contained specific measures that will be particularly damaging to our economy. I was disappointed by the continued fixation with the spending plans and targets of the previous Government, despite a dramatically improved revenue position.
The Government have boxed themselves in through their economic policy since the election. The clear result is a macro-economic approach that damages Scotland's economy. Micro-economic tinkering has been insufficient to remedy the mistakes of 18 years of Conservative Government and one year of new Labour Government.
The Chancellor should not need me to tell him about the nature of the Scottish economy. However, even with a Scottish Member in the hot seat at the Treasury, policy appears still to be dominated by the prevailing economic conditions in the south-east of England.
Does the Chancellor not recognise the export-oriented nature of much of Scotland's industry, or the importance of rural industries in the manufacturing sector, both of which have been hit by the dual policy of high interest rates and the strong pound? The Chancellor has awarded control over interest rate policy to a committee—with no Scottish voice or membership—that has increased interest rates five times since the election.
High interest rates may be necessary to address the overheating of the south-east of England, but they are disastrous for the Scottish economy. Time will tell whether the Chancellor has done enough in the Budget to prevent the Monetary Policy Committee from increasing interest rates further. When the Scottish economy is growing more slowly than the economy of the rest of the United Kingdom, the Chancellor has taken a great risk.

Mr. Michael Fallon: Will the hon. Gentleman give way?

Mr. Swinney: No. I have only 10 minutes and I want to make progress.
The folly of high interest rates has been compounded by the decision to proceed with yet another above inflation hike in fuel duties. That is another Conservative

policy continued by the Labour Government. It is ironic that the Conservatives should complain about a higher than inflation increase in petrol duty when they presided over similar measures several times during the 1992–97 Parliament.
The people of rural Scotland will not be easily fooled by the Chancellor's soft words on a review of rural petrol prices. We have heard a lot about that before. Some of the analysis that I have seen from the Western Isles council and the Highland council shows that prices for rural drivers are between 20p and 50p a gallon higher than those for urban drivers. Every time that rural drivers fill up their petrol tanks they may pay £3 or £5 more than those in some other parts of the country. The additional cost of that increase alone is estimated at £60 each a year.
The reduction of petrol prices in rural areas by BP has already been mentioned. It would be churlish of me not to welcome that. However, the Government must take action to reinforce the decisions of private companies to ensure that essential car users—all rural drivers are essential car users—are properly protected. My hon. Friends and I will vote against the increase. I hope that others will join us.
The Chancellor has submitted himself to formidable public expenditure constraints, inherited from the previous Government. The straitjacket that he has adopted was mirrored by the language that he used on Tuesday. I suspect that his words brought a smile to one or two of the remaining Thatcherites in the House. He said:
A substantial fiscal tightening has been achieved…my budget will lock in this tightening for 1998–99."—[Official Report, 17 March 1998; Vol. 308, c. 1099.]
The reality of the Budget is spending cuts and poorer services when revenues are rising far beyond even the Chancellor's expectations.
Some spending rabbits have been pulled out of the hat, including £500 million for transport. On closer examination, the majority of that appears to be for the London underground, which has attracted more than £10 billion of public resources in the past 10 years.
The Scottish public expenditure totals have been boosted by an extra £70 million for health, education and transport. However, in real terms, public expenditure in Scotland will fall by more than £0100 million next year. As a direct result of the Budget, real terms spending on local government in Scotland will fall by a further £15 million, while industry and enterprise—a critical area when we are trying to motivate the Scottish economy to higher levels of growth—will lose £1.5 million. That is the real story of the Chancellor's spending plans. None of it takes into account the effect of higher than expected inflation on the Chancellor's public expenditure estimates. If we take away the gloss and look through the mirrors that were cleverly presented by the Chancellor, there is a continuing real-terms crisis in the public services on which our public depend.
The Conservatives' spending targets have been retained by the Labour Government and have failed to address the real crisis in many aspects of our public services. I heard one Conservative Member on Tuesday bemoan the fact that, as a result of the Chancellor's Budgets, individuals will see not their income tax bills but their council tax bills going up. I can only pose the question: who on earth did the new Labour Government learn that little trick from if it was not the Conservatives?
The Budget has failed to make a difference for Scotland. The Chancellor had an historic opportunity on Tuesday, with public finances in a much healthier than expected condition. The coffers were fuller, but the Government failed to tackle the genuine public spending crisis. Public debt has been slashed, revenues have soared, the war chest is growing, but the Chancellor still lumbers on with a tightening of public expenditure totals of which the Conservatives would have been proud. People voted for political change at the general election, but I suspect that many of them are wondering when on earth it will come.

Mrs. Helen Brinton: I add my congratulations to those already offered to the Chancellor and the Treasury team. Those of us on the Government Benches who were listening in the Chamber on Tuesday were delighted with all the Budget's good news on its central themes of encouraging and rewarding work, supporting families, women, children and business, and providing more money for education and health. The Conservative party kept waiting for the bad news, but it did not materialise. Despite the desperate attempts of Conservative Members today, they have failed totally to dampen the enthusiasm with which the Budget has been received by people not only in my constituency but in theirs as well.
That is not, of course, to say that no more can be done. We have talked a lot about welfare reform in this debate, to great effect, but I shall concentrate my remarks on environmental aspects. There, too, there was much good news. I welcome the measures to improve public transport, reduce VAT on some energy-efficiency measures—even if those still apply only, as yet, to a proportion of homes—and the favourable treatment of road fuel gases. I note that further measures relating to aggregates and water pollution are up for consideration. I hope that there will be others, encouraging innovation and environmental technologies in which our country could be a leader.
I welcome the setting up of the task force under Sir Colin Marshall, with its crucial remit to investigate the use of green taxation aimed at reducing industry's energy consumption. I welcome, too, the inclusion of an assessment of the environmental impact of tax measures in the Red Book, which show how the Budget will reduce greenhouse gas emissions and improve local air quality. I wonder, however, whether we can go further.
I should like to reiterate one of the key recommendations of the first report of the Environmental Audit Committee, of which I am a member. The report was published a couple of weeks ago. It was our view that the complexities of environmental tax reform require the setting up of a special advisory body to examine the overall impact of green tax proposals. Such bodies, indeed, already exist in different forms in other countries. I hope that the Government will consider that. Obviously, it will be for them to decide on the precise constitution and powers of such a body. My other remarks are related to my constituency, although they have a similar thrust.
Peterborough is one of the four environment cities in the United Kingdom. Our environment city trust has recently completed an audit of energy consumption across the city. The results will be published shortly. However,

I can say to you that, following a discussion with the director, Richard Dean, the audit has revealed that, whereas the potential saving on industry use of lighting is quite minuscule, for combined heat and power it is enormous. We could make, I am told, great energy savings at no cost to business, which is what I hope we all want. I shall be very glad to turn over the evidence to the new task force if so required.
The trust is also working on a waste audit—a life-style analysis of waste materials in the city. That will provide a factual basis for assessing the impact on business of tax changes and will identify areas where savings in waste management could be made. Through the green business forum, we are also planning a transport audit of the use of different forms of transport. We are waiting only for funding; the sums will be small.
Only through those and other forms of investigation of particular environmental measures will it be possible for us to make a rational and fair assessment of their impact and, indeed, of their likely success as measured against properly defined targets. I say to you that the overall target—

Mr. Deputy Speaker: Order. The hon. Lady is using the word "you". Will she try to use correct parliamentary language?

Mrs. Brinton: Many apologies, Mr. Deputy Speaker.
The Government's overall target on greenhouse gas emissions is a cut of 20 per cent. by 2010. That is an aim of which we should all be proud. It is an ambitious target, and to many of us involved in environmental matters inside and outside Parliament, it seems that, although an excellent start has been made, time is short and of the essence. Everyone will have to work together very hard to gain acceptance for an organised and concerted approach to environmental tax reform.

Mr. Philip Hammond: My right hon. and hon. Friends who have spoken in this debate, yesterday and on Tuesday have covered many of the vital areas of the Budget. They have identified our practical concerns about the operation of the working families tax credit—a laudable attempt to deal with a long-standing problem, but one which we believe is fraught with many difficulties.
My right hon. and hon. Friends have drawn attention to the high price that the Government are paying for eliminating the very high marginal deduction rates which some families on low incomes have hitherto suffered. The price that the Government are paying is an increase in the number of families who will suffer marginal deduction rates of 60 per cent. or more. As we all know, an effective tax rate at 60 per cent. is a powerful disincentive to work. The jury must be out on whether the net effect of the Government's quite laudable efforts to remove those very high marginal deduction rates will be positive, overall.
My right hon. and hon. Friends have also drawn attention to the Chancellor's failure to address the central, immediate problem facing the British economy: the very high level of sterling, which is decimating our manufacturing industry. That problem is faced not just by exporters, as the Chancellor suggested in his Budget speech, but by all manufacturers, as they deal with


increased import penetration. The Budget statement says that the Government's objective is to see sterling at a competitive rate in the medium term, but I can tell the Paymaster General—other hon. Members who have talked to businesses in their constituencies will also be able to tell him—that, unless something is done in the short term, there will be no manufacturing industry left to benefit from that competitive exchange rate in the medium term.
Time is short, so I shall address a few specific issues arising from the Chancellor's statement. There is a continued confusion in Government policy over subsidies for employment. The welfare-to-work programme is at the centre of the Government's policy platform, and it is dependent, at least in part, on the principle of paying employers subsidies to employ workers.
We have also seen in the Budget the introduction of a £75 a week subsidy for the employment of the long-term unemployed. Both those measures are based on the principle that, at the margin, employment is sensitive to the cost of wages and the other costs of employment.
Yet, at the same time, the Government are telling us that the national minimum wage will not destroy jobs. Essentially, that statement depends on the premise that at the margin employment is not sensitive to wage costs. That is the contradiction at the heart of Government policy.
If the Minister of State, Department of Trade and Industry, the hon. Member for Makerfield (Mr. McCartney), is correct, and employment is not sensitive at the margin to wage costs, the Government should stop subsidising jobs now, because that is throwing money away. However, if he is wrong, the Government had better start quantifying the cost of the national minimum wage and its effect on unemployment.
In introducing his changes to employers' national insurance contributions, the Chancellor said that he would
cut the costs of hiring at the wage levels where most new jobs are created."—[Official Report, 17 March 1998; Vol. 308, c. 1103.]
However, at the same time, the Government, through the national minimum wage, are increasing the cost of hiring at precisely that level. Confusion abounds.
The changes to employers' national insurance contributions may be neutral overall, but they have significant sectoral and regional impacts. The increased contribution is a payroll tax on all those earning more than about £450 a week. The tax falls initially on the employer—I doubt whether the Chancellor would have dared to raise employee national insurance contributions 2 per cent. above the present ceiling, or to raise income tax rates by 2 per cent.—but, ultimately, the effect of any tax on employment costs must fall on the employee in the medium term, as pay rates come to be negotiated.
That payroll tax will hit firms employing highly paid workers, such as those in the technology and financial services sectors—professional firms offering the kind of highly paid, highly skilled work that the Government seek to encourage. The tax will also disproportionately affect firms in London and the south-east, where wages are higher than elsewhere, so employees there are more likely to be remunerated at the rate of £450 a week or more. That is another breach of the Prime Minister's promise not to raise taxes on the middle-income earners of middle England.
The Chancellor, rightly in my opinion, drew attention to the impact of very high marginal deduction rates, which are effectively high marginal tax rates. He has sought valiantly to address some of those issues through his reforms of tax and national insurance for the lowest paid.
However, there are other areas of the economy in which very high marginal rates apply, and I shall draw attention to a couple of those. Although, in the short term, the changes in corporation tax will produce a negative effect on the cash flow of the corporate sector overall, they are none the less welcome because of the reductions in rates. I also welcome the Government's decision to exclude from the instalment payment system companies defined as medium sized.
I am disappointed, however, that that definition includes only companies with profits of up to £1.5 million. The Chancellor wants to encourage growing businesses. He said so in his speech. Yet I submit that what the United Kingdom economy desperately lacks is a large enough sector of prosperous medium-sized companies. We have many small companies and we have world-class large companies, but we have nothing equivalent to the German Mittelstand companies—that great body of medium-sized, often family-owned companies that have contributed so much to the growth and success of the German economy.
Yet in the United Kingdom, the current corporation tax system presents companies whose profits are between £350,000 and £1.5 million with marginal rates of corporation tax higher than the mainstream rate. If the Chancellor can take the lesson of the disincentive of high marginal rates on board when he is dealing with the benefits and national insurance systems, I hope that he can take on board the same issue when he considers corporate taxes.
Stamp duty is another subject which has received relatively little attention so far in the debate. In his first Budget, the Chancellor introduced additional steps in stamp duty tiering, and on Tuesday he increased the rates for property selling at more than £250,000, and also for that selling at more than £500,000—[Interruption.]
The Government Deputy Chief Whip, from his seat on the Front Bench, laughs. He is thinking about houses, and wondering whether I am thinking about my house or my hon. Friends' houses. However, the duty applies not only to houses but to factories, shops and warehouses—business assets and institutional property owned by pension funds. It is an attack on the liquidity of the institutional property sector, and on property and assets held for the benefit of productive business throughout the country.
We now have a grotesque set of distortions to the operation of the property market. At £250,000, the marginal rate for the additional pound achieved in selling a property is a staggering 250,000 per cent. At £500,000, the marginal rate of tax for the additional pound is 500,000 per cent. That is plain silly; clearly it will spawn a whole avoidance industry, which cannot be what the Chancellor wanted.
It cannot be good for the country as a whole to develop the stamp duty system as a serious revenue raiser, for which it was not designed. That will have a serious negative effect on the operation of the institutional property market and on the supply of property available to businesses to rent for productive purposes. That, in turn, will increase their costs.
Finally, I would like to say a brief word about the so-called green taxes in the Budget, especially those on petrol and landfill—

Mr. Deputy Speaker: Order. I am afraid that the hon. Gentleman has already used his 10 minutes.

Dr. Stephen Ladyman: Thank you, Mr. Deputy Speaker; I am grateful to be given the opportunity to contribute to the debate today, especially as the Minister on the Front Bench today is my hon. Friend the Paymaster General. On behalf of my constituents, I have made representations to my hon. Friend over the past few months about individual savings accounts and personal equity plans, and when I heard the Budget I was most grateful to find that those representations had borne fruit and that the Government had recognised the problems.
I have been receiving telephone calls in my constituency office over the past two days from people saying, "At long last, we have a Government who really mean it when they say that something is out for consultation, and who really listen when people make representations." Long may that continue.
It is typical of the Conservative party that when we listen to representations we are accused of doing U-turns, and when we do not listen we are called stubborn and arrogant with power. That is typical of the way in which Conservatives have addressed the issues over the past 11 months.
Listening to the debate, not only this afternoon but over the past two days, I have been struck by how detached the Conservative party seems to have become from reality. Conservative Members have obviously been told what to say—presumably by their public relations people, whom I shall not call spin doctors because I know how odious the employment of doctors has been to the Conservatives over the past 18 years. They have been told to refer to their golden legacy. That legacy is as mythical as golden goose eggs.
Conservatives constantly refer to the high level of the pound without pointing out that it was their failure to increase interest rates before the election that caused the need to increase them after it.
The Leader of the Opposition began his remarks after the Budget by saying that the Opposition would support some of the tax reforms for business, but, by yesterday, he was saying that he opposed tax reforms for business. Opposition Members have been told to say constantly that this is not a business-friendly Budget, but they cannot offer an explanation for why the stock market is breaking all records.
I do not want to pick on any individual Opposition Member, but I was struck by the comments of the right hon. Member for South Norfolk (Mr. MacGregor). He began by telling us that he did not understand the working families tax credit and, because he did not understand it, that it could not work. That was a strange argument. He then talked about the effect of petrol prices on rural communities, but forgot to point out that the escalator to increase petrol prices above the level of inflation was set by the previous Government at 5 per cent.

Mr. Ruffley: The hon. Gentleman is wrong to say that there is some equivalence between the

increases announced by the last Conservative Chancellor and those announced by the current Chancellor. The two increases announced in last July's Budget have taken place over the few months since then, and that is in no way equivalent to what was factored in by my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke). The hon. Gentleman is plain wrong—will he apologise?

Dr. Ladyman: I do not accept that I am wrong. The previous Administration introduced the escalator with a great deal of pride and claimed it as some testament to their environmental credibility.
The right hon. Member for South Norfolk raised the question of church repairs. He seemed at one point to be calling for higher income tax so that there would be more covenant income, but he failed to point out that rural churches are suffering as a result of the level of VAT on repairs, which was introduced by the Government of which he was a member.
That is typical of the unreality of the Conservative party in this debate. Opposition Members have failed to mention people, which is what this Budget is all about. It is about people who have ambitions. Even unemployed people and those who have been out of work for a long time have ambitions. They may not be big ambitions, like those of hon. Members, but they are important to them. Someone on a fixed-benefit income is unlikely to be able to achieve those ambitions. This Budget is about getting those people back to work and recreating their ability to fulfil their ambitions.
I have been impressed by what the Chancellor has done in the Budget and I have tried to put it into some context. Slipping off message for a moment, having spent most of my life working for the Labour party in one form or another, I know that the old debates in the Labour party were about creating work, full employment and fighting unemployment. It is only recently that what some call old Labour started talking about benefits. No one has ever told me that the Jarrow marchers marched for increased benefits—they marched for increased work. My right hon. Friend the Chancellor has reverted to the old traditions of the Labour party to create full employment, and he is to be congratulated. He is not new Labour or old Labour—he is older Labour.
It is easy for Opposition Members to put down the fact that my right hon. Friend has provided £50 million for rural transport, but it is £50 million more than the Conservative Government ever made available. They closed down bus services with their deregulation policy. The money will go a long way towards helping rural constituencies. It is not the full picture, but it is at least a start.
Encouraging zero-emission vehicles and clean vehicles is close to my heart, as a company is to build a factory in my constituency where zero-emission vehicles will be produced. The Chancellor has commented on the differential between duties on certain types of clean fuel and petrol. I ask him to look at the possibility that hydrogen—which is needed to drive fuel cell-based vehicles—could be included in that differential. The Chancellor should look also at VAT regulations in respect of investments in taxis and buses where those vehicles are powered by zero-emission engines and clean engines. The Chancellor may be able to encourage investment in clean technology over and above the measures in the Budget.
I very much agreed with the comments of the hon. Member for Beckenham (Mrs. Lait) on bootlegging. I have a tremendous problem with bootlegging in my constituency. Just last week, I found a young man lying outside the door of my constituency office, vomiting. He could not have been older than 14. I put him in my car and took him home to face the wrath of his parents. He would have been drinking bootlegged beer, which is creating a tremendous social problem in my constituency. The police tell me that it is becoming a major problem. The Chancellor must try to improve security and controls on bootlegging, and he has said that he is willing to consider that. The more he does in that area, the better.

Mr. Deputy Speaker: Order.

Mr. Archy Kirkwood: The longer I serve in the House, the more I think we should look carefully at how we introduce Budgets in it. This Budget is particularly complicated and technical, and it is slightly bizarre and daft that the Chancellor has to get involved in so many different issues and, in one great splurge, release his plans—having been in Budget purdah—on an unsuspecting world, which makes it difficult for those of us who follow these things, particularly technical issues such as social security, to cope with them adequately.
I pay credit to the Government; the Chancellor was wise to make his pre-Budget statement in November. It assisted those of us who are interested in the areas he said he was looking at and it made the work of the Social Security Committee easier. Our third report has direct relevance to this debate and I hope that hon. Members will get a chance to look at the detail of the important matters we investigated.
The Paymaster General is to wind up the debate. He is a man with influence on budgetary matters. Perhaps the Modernisation Committee should examine whether we should have an annual uprating statement, including a technical amendment of taxes Bill, and then leave some of the other complicated issues—such as working families tax credit—to be dealt with in a more consultative and deliberative way. I welcome what the Government have done in so far as it relates to low-income working families.
I want to deal with some of the matters that I think require further attention if these reforms are to be implemented successfully. It is important that, in moving to working families credit, we build on the successes of family credit. I remember the difficulties that arose when family credit was introduced in 1986, especially in terms of take-up, but the benefit now has a good record, not only in rates of take-up but in effective administration. In 1996–97—the most recent year for which figures are available—91.9 per cent. of new family credit claims were paid within five days. Moreover, 91.3 per cent. of assessments were accurate. By benefits standards, that is hard to beat. Those hard-won standards ought also to apply to the new working families tax credit.
I propose that, so that we know clearly what is going on, and because statistics are out of date—it is sometimes two or three years before they are made available—the

Government consider setting an annually published target for take-up of working families tax credit. Everyone, including me, assumed that the working families tax credit would automatically have a higher take-up, but—if I understand the fine print—it will have to be applied for. If so, we may be going back to what happened with family credit in 1986, which would be a great shame. I hope that the Government will be alive to that and consider take-up rates as a matter of urgency.
The Paymaster General is the most appropriate Minister to whom to address these comments and I am sure that the Secretary of State for Social Security will thank me for doing so. The technology with which the Benefits Agency works is obsolete and inadequate to meet the demands that the changes proposed in the Budget will bring. It is no use waiting for the millennium bug—or some other excuse—before renewing the equipment; is now 10 or 12 years out of date and badly needs updating. If we do not take this opportunity to do so, we shall ask the impossible of those Benefits Agency staff who will have to implement the administrative changes and it will be unfair if we then expect them to get the new benefit right first time.
The Social Security Committee has set itself the task of examining the implementation of the measures proposed in the Budget, especially working families tax credit. The Treasury Committee will, of course, examine them, too, and we shall study with interest its investigations and recommendations after direct examination of Treasury Ministers.
I think that the adverse effect of the Budget on small employers and the self-employed has been underestimated. I was not convinced that Martin Taylor, who otherwise did a very good job, spent enough time considering that problem in enough detail. We shall have to return to that matter.
The Secretary of State for Social Security gave me half an assurance that she, in concert with her colleagues in the Department of the Environment, Transport and the Regions, was doing more about housing benefit. I understand the necessity for that. If housing benefit is left as it is, it could, for many of the families that we hope will be assisted, soak up the whole financial benefit derived from working families tax credit.
I agree with the hon. Member for Croydon, North (Mr. Wicks) that the quality of child care is an essential issue. As a second order question, I think that someone should examine the future on-costs for local authorities of registering child minders and child care facilities.
We shall also need to consider the wallet versus purse issue. The hon. Member for Chingford and Woodford Green (Mr. Duncan Smith) was not right in very much of what he said, but he was right to draw attention to some of the difficulties in judging to whom the girocheque should go. Giving evidence to the Social Security Committee, Martin Taylor made much of the importance of the psychology of paying the benefit through the wallet rather than the purse. We will all have to be careful and monitor exactly how choices about the payments are made so that we can ensure that the full benefits of these changes are realised.
On part-time work, I think that a new watershed may be created by the 16-hour qualifying period. Many of my constituents are part-time workers in the knitwear


industry. There may be consequences if we create such a huge watershed. We shall also have to watch that situation carefully.
I believe that the proposal to protect the rights to national insurance benefits for those who earn between £64 and £81 a week will create a three-tier system. First, there will be those who earn less than £64. Secondly, there will be those who earn between £64 and £81, who will receive credits, although I do not know how people who appear on the payroll at £70, for example, will be identified so that they can be credited. Will it be the employer's responsibility to notify the Inland Revenue that they have suddenly come on to the payroll at that rate? Thirdly, there will be those who earn more than £81, who will receive full national insurance benefits. That is another important matter needing careful examination.
Again, I agree with what the hon. Member for Croydon, North said about the future of child benefit. The Select Committee, on which I serve with the hon. Gentleman, will want to examine that question and contribute to any consultation. I also agree with what he said about the contributory principle—but perhaps we shall learn more about that when the Green Paper is published next week.
The Budget is welcome in so far as it relates to welfare to work, but I fear that the Government may be ignoring people who are excluded from the world of work, particularly rural low-paid pensioners. I also believe that the Government's macroeconomic stance is creating difficulties for manufacturing industry, especially exporters, who are suffering because of the high value of the pound.
Some of the points that have been made about disadvantage in rural areas also need further consideration, but I welcome the Budget in so far as it relates to the incentive to get people back to work. However, we must ensure that there are enough jobs, as there is no point trying to get people off benefits and into work if there are no jobs for them to go to.

Kali Mountford: I am very pleased to be able to speak in this debate on what I believe to be a stonking good Budget which will herald a turning point in our economy. It will restructure the economy and the tax and benefits system, and it will refocus benefits for everyone, especially the poorest in our communities. Moreover, the Budget is non-judgmental; it does not distinguish between people according to the size and shape of their families; nor does it exclude people from work and assume that people who are workless are workshy.
I represent a largely rural constituency and I must tell the House that the poverty that people in rural communities face is worse than that almost anywhere else. It is unhelpful of Conservative Members not to recognise the benefits to rural communities that the Budget and other measures will bring. My constituents who live in villages are far from urban centres where most of the help resides, including voluntary organisations, the Employment Service and social services. Few of those agencies have outposts in villages. Evidence shows that fewer and fewer resources are available in villages, which are literally crumbling under the strain.
What of the poorer people in those communities? People who live in my village—

Mr. Ruffley: Will the hon. Lady give way?

Kali Mountford: I am sorry, but time is short—although I am grateful that the hon. Gentleman is interested in what I am saying.
People who live next door to me, for example, have great difficulties accessing the resources that are available to people in urban areas because there are so few buses. The village along the road had its bus service cut so dramatically that the residents had to form a bus action group to press for the reintroduction of the rural bus.
I think that £50 million will go a long way towards helping with that, but let us not forget the £500 million that is being made available for all public transport. Conservative Members have said that that is too little, too late, but I do not remember Conservative Chancellors of the Exchequer making such resources available. They took the dogmatic approach that the private sector will reap all—it certainly reaped my bus services. Hon. Members may think that bus services are not important, but for my constituents they are, as they are the access to everything else. For young people who can now get a pass for the bus service and so access the new deal, it could be the turning point in their lives.
Since September, the number of young unemployed people in my constituency has almost halved, I am pleased to say. Only 150 are left without work. We are already seeing the effects of economic restructuring to enable people to get access to work. There is money for research and development, money to encourage people to invest in the long—and not the short—term and money so that we can have a more stable economy. All of those developments will help small businesses in my constituency and elsewhere to make long-term investments to provide jobs.
In another debate, I said that the new deal would be an important part of the strategy to encourage small businesses to take on young people so that their businesses can grow. Few young people in my constituency still need the new deal, so I am particularly glad about its extension to other people who need it at least as much, in particular lone parents. The new linking rules for benefits for lone parents and people with disabilities are welcome indeed. They will take away the fear of trying out a job.
A couple of weeks ago, I met someone at my surgery who had recently found herself a job. She is disabled and had pointed that out during the job interview, but everyone agreed that she would be suitable and she was given a date to start. Sadly, on her first day she was unable to perform her first task because of her disability and her immobility, so it was amicably agreed that she should not even start the job. I was disappointed that the firm took that decision and I hope that we can reverse it in the near future. Knowing that there was no fear of her losing benefits if she tried the job for a time to find out whether it could be redesigned to suit her needs might have helped both her and her employers.
Sometimes it is difficult for employers to imagine how someone with severe disabilities can fit into the new style of working to which they are being introduced, but, with a little imagination, people can often find ways of fitting


the job to the person with the disabilities rather than trying to make that person fit into an old style of working. The change will be a magnificent improvement for people such as my constituent.
A major step forward is the fact that we are focusing on children instead of the family structure. I have long argued that children are the most important consideration when we make decisions on tax, benefit and work. It is wrong to design child care strategies to suit the needs of parents or employers. I have made many mistakes by encouraging people to take particular styles of child care only to find that they do not suit their families. It is about time that we considered a strategy that suited the child.
I was disappointed to hear the hon. Member for Chingford and Woodford Green (Mr. Duncan Smith) suggest that, by introducing this child care strategy and help for parents, we would be doing children a great disservice. We have been doing them a great disservice for many years and it is a disgrace that this country has the worst record on child care in Europe.
To assume that making child care available is doing some disservice to children and to make a moral judgment on families who choose to take up such services says a great deal about our attitude to families. They have made their decisions about partners and whether they will be married. Many people make decisions against their best wishes. Partners die, or leave, and people are often left with complex family structures. Are we to make a moral judgment about such people?
In spite of those complex family structures, people still need to work because a lifetime on benefits is abhorrent. Are we to say that if people go out to work their children will be less well served than the children of their neighbours who are fortunate enough to have stayed in one marriage and who do not need both partners to work—a rare family these days as less than one third of families are like that? The majority of families probably need access to some child care at some point. Should we tell them that their children will be so ill served by that system that they should not make that choice and that a lifetime in poverty on benefits is preferable? I hope not.
My children have been in child care at times—I hope that they are in pretty decent child care right now—and I would like to think, or in fact I know, that they are well-rounded and lovely people and have not had any disbenefit from that experience.
There is plenty of evidence to show that children in child care, especially those who go to nurseries, benefit a great deal. The IQ of some children who have been in child care builds up, although immediately they come out of that constructive environment it often tapers off because the stimulation is no longer available. In those early years, stimulation is good for children and I very much welcome the pilot programme of early excellence centres that will bring together all sorts of child care elements. Working in partnership is a good way forward and will provide the best for our children. I hope that the whole House agrees with me on that.

Mr. David Ruffley: I think that it was the late fain Macleod who said that the Budgets that were cheered loudest on the day looked the worst six

months down the road. Conservative Members believe that this Budget is one such. It is a triumph of style over true substance and the most over-hyped Budget in the history of modern politics. It was distinguished by grandiloquent language. We heard that the Chancellor is the "people's guardian" and talk about this being a once-in-a-generation opportunity to modernise tax and benefits. Such terms and style of language are ridiculous.

Mr. Fallon: Perhaps it is time that we changed the people's scriptwriter.

Mr. Ruffley: My hon. Friend is right. It is language as ridiculous as a Chancellor who borrows someone else's children for a cheap photo opportunity the weekend before the Budget.
This Budget set up great expectations; we contend that the people will be disappointed because it fails three tests by which it should be judged. The first relates to the welfare and tax proposals. No doubt, the aim is to increase incentives to work and the number of jobs, and to reduce the welfare budget, but it will fail.
The second test relates to the delivery of stable macro-economic management; the Budget will fail to do that. It will not be able to sustain the rates of growth that are necessary and desirable for our country.
The Budget also fails the third test, which is to deliver on new Labour's promise not to increase the tax burden on middle Britain.
The Labour party is very keen to invoke the words of the Institute for Fiscal Studies. Paul Johnson—not the Conservative commentator, but the deputy director of the IFS—said that Labour's welfare proposals certainly do not represent "a major reforming package".
The working families tax credit is essentially a rebadging of family credit under the Conservative Administration. But it is much more expensive, as it goes higher up the income scale. We cannot see how it can possibly deliver cuts in total Government expenditure. It may be classified as other than social security spending, but it will result, as night follows day, in a greater liability for the British taxpayer.
No Labour Member has made any serious attempt to answer the questions about wallet versus purse. We hope that the Minister will answer the questions posed by Conservative Members.
The child care proposals are of interest to a party—the Conservative party—that introduced a disregard for child care in 1993. We are certainly not against child care in principle, and it is a calumny for Labour Members to suggest that we are. But we have real concerns about the package proposed in the Budget.
The IFS and Mr. Paul Johnson are also concerned. He says that
the long-term costs could run into billions".
There is no sensible forecast in the Red Book of the ultimate cost of the proposals.
We are concerned about the nannies and grannies who do valuable care work in the home for no pay. They will not be favoured by the proposals. Money for child care will be claimed for services rendered by registered child carers, but not for work done by volunteers. The Conservative party has an excellent solution to that: the transferable tax allowance. Many of my constituents would have liked that to be in the Budget.
The state-registered nature of the child care allowable under the proposals amounts to nothing less than the nationalisation of child care. [Laughter.] Labour Members may scoff, but they must understand that incentives will be provided for those whose children are currently cared for by nannies, grannies or other relatives to buy child care at the state's expense, and that must be an undesirable outcome. The proposals, together with the cut in the married couple's allowance, show that the Budget is not especially a Budget for the family.
The proposals are meant to provide work incentives and encourage people back into the labour market, but the Labour party has not even begun to deal with the critical question of what is the chief determinant in creating jobs. Mr. Kaletsky in The Times pointed out that the true determinant is economic growth, not packages and tax incentives of the kind set out under the welfare proposals.
The Budget also fails the test of proper macroeconomic management that delivers stable economic growth, which is the real determinant of jobs. The fact that the Chancellor departed from the long-established convention of opening the Budget statement with a proper detailed analysis of the macroeconomic environment and outlook was telling. He skated over the issue, and the reason is no surprise: he did not dare to address the issues of the high pound and high interest rates.
Nothing in the Budget does anything to address those two central problems for the real economy. It is no coincidence that the high pound is going even higher. As speculators fear an interest rate rise on the back of the Budget, they are buying sterling and pushing up its value. The Budget has failed in that respect, too.
Labour Members always ask what we would have done differently, to ensure that the pound and interest rates were not so high. I am happy to tell them. The bad economic management since 1 May has destroyed the golden economic legacy, primarily through the transfer of control of monetary policy to the Governor of the Bank of England. Under a Conservative Administration, there would not have been a Monetary Policy Committee packed with people who do not understand monetary conditions or the real economy.
I am sorry that the hon. Member for Bolton, West (Ms Kelly) is not in her place. She would certainly have joined us in calling for confirmatory hearings for nominees to the Monetary Policy Committee, as then we might have had a bit of common sense on that body. The net result of mismanagement since 1 May and the Budget proposals is that we face a recession. All the serious commentators say that there is a serious risk.
The Red Book shows us why. Consumer spending is set to fall, with the tax burden rising, the balance of payments surplus turning to deficit and the savings ratio falling. I remind Labour Members to look at page 116 of the Red Book. They will discover—

Mr. Deputy Speaker: Order. I call Mr. David Drew.

Mr. David Drew: My hon. Friend the Member for Bolton, West (Ms Kelly) referred to this as a radical Budget, and I am only too happy to concur, except that I would add that it remains within a well-rehearsed set of themes announced on numerous occasions by my

right hon. Friend the Chancellor. I want to re-rehearse those themes quickly, to set the context, before coming to the substance of my speech.
The themes are stability, with low inflation; fiscal rectitude; ending boom and bust; reducing our indebtedness; fairness, the centrepiece of which is the welfare-to-work strategy, with the evolution of a national anti-poverty strategy now locked in place; help for business, with increased transparency and clarity in the way in which we shall offer help, and a taxation structure that adds to the benefits of long-term investment and rewards entrepreneurship as well as giving specific help and advice; and, last, but not by any stretch of the imagination least, a concentration on the rebuilding and, indeed, enhancement of public services.
My right hon. Friend the Secretary of State for Social Security gave us a sense of the excitement of our getting to grips with a proper, integrated national child care strategy. That has been universally welcomed by the child care organisations.
I want to discuss the implications for child care in rural and semi-rural areas. I was interested to hear the hon. Member for Bury St. Edmunds (Mr. Ruffley) calling the proposals the nationalisation of child care. They are anything but that, because they allow flexibility in rural and semi-rural areas, where there is little competition or even a monopoly of care. Women in particular, and parents in general, need to know that their children are in safe hands. That can be assured only if there is quality child care provision, with genuine investment and appropriate regulation. I am pleased to see that that is a key part of the Government's proposal, from which rural areas stand to gain as much as urban areas.
I shall restrict my remarks to two of the Opposition's lines of attack. The first concerns their environmental allegations in regard to the petrol tax escalator. I remind the Conservatives that they initiated the petrol tax escalator when they once claimed to have environmental credentials. The Conservatives' torch logo is appropriate, as it sums up how out of touch they are with the environment. Perhaps the colour of that logo should change from blue to brown, as the Conservatives have no credibility left on the environmental front.
We welcome the fact that the Government are trying to do something about one of the most damaging pollutants and prevent the depletion of the quality of our environment. It is tough, and we must rely on a carrot-and-stick approach. We must talk to our constituents and rationalise: we must explain that they cannot have it both ways. However, I believe that people are genuinely beginning to get the message; they are realising that they will not see an improvement in the environment if they continue to use their cars whenever they want.
I served on the Committee that examined the Road Traffic Reduction (United Kingdom Targets) Bill, and the Opposition spokesman, the hon. Member for Christchurch (Mr. Chope), did his best to filibuster and block that legislation. The Opposition should understand that people want to see those measures put into effect at the earliest opportunity. They are prepared to make sacrifices so long as there is a reward. We can provide that in the form of the carrot, by rebuilding our public services, including our bus and rail services. That will not be easy; the Budget has made a start, but we must go further.
The Budget contains other measures that affect the environment. My hon. Friend the Member for Nottingham, South (Mr. Simpson) talked at considerable length yesterday about the reduction in value added tax on the installation of home insulation materials, so I shall not go over the same ground. The Government have increased landfill tax, and we have pledged to examine other difficult issues. For example, we shall consult about the impact of a carbon tax on business, industry and commerce. We shall consider how we can introduce a sensible environmentally sensitive tax regime that is both fair and comprehensive.
We must recognise that we are moving inexorably towards some form of green taxation. Although Labour Members welcome that, we do not wish to put the Chancellor of the Exchequer in an impossible position: we must take the nation with us. However, there is a clear demand for such taxation, as people know that the alternative is worsening health, the depletion of resources and an increase in pollution and associated dangers for them and their children.
The Opposition's second line of attack stems directly from their petrol tax accusations. It concerns principally the people who live in rural areas, of whom I am one. I am proud to represent the constituency of Stroud. We must appreciate that the rural economy is extremely complex and does not rely simply on the motor car—although that is an important feature of rural life. One must ask why Conservative Members did not argue against all the previous increases in petrol tax. They did not recognise the impact of that tax in terms of poverty, loss of services and the fact that people could not travel to find work.
We shall address those issues. We must find other means of enabling people to get to work—or, more particularly, we must provide work in rural areas. I am pleased to see that teleworking is a fast-growing industry. There are some dangers in that field in terms of low pay and poor conditions, but people may choose the type of work they do, when to work and when to be with their children. Teleworking provides tremendous opportunities and people do not have to use their cars to travel to work. That is one way of addressing a very difficult problem.
My remarks have been sparked partly by the speech last night of the hon. Member for Cotswold (Mr. Clifton-Brown)—who is near me geographically, if not politically. He launched a full-frontal attack on what he considered to be the Government's failure to assist public services in the county of Gloucestershire. That is total and absolute gall on his part. Although it is only a start, we have begun to turn around education in Gloucestershire this year. All our schools have received a budget increase of between 1 and 2 per cent. That is not a huge amount, but it is better than cut after cut, which head teachers grew used to under the previous Government. They are now much more confident that the present regime understands what the schools want and will finance them properly.
The hon. Gentleman's attack on health and bed blocking in my authority was also totally unjustified, because we are dealing with problems caused by the previous Conservative Government. It is totally unjust to claim that we do not care about public services. We will rebuild public services and we shall see this country into the next century with the quality services that it deserves.

Mr. Steve Webb: There are many elements in the Budget that I welcome warmly. I shall touch on three of them before moving on to what I consider to be an important omission.
The first measure that I welcome particularly—I have argued for it for many years—is the sensible reform employer national insurance contributions. It has always seemed anomalous that, when employee contributions were more or less sorted out, the previous Conservative Government did nothing about employer contributions and allowed the entry fee and the absurd tiered structure to remain.
This Government sensibly produced a pre-Budget consultation document, to which the Liberal Democrats responded. In our response, we argue that employer national insurance should be restructured, perhaps with a uniform rate above the lower earnings limit. Except for the fact that the Government have raised the lower earnings limit, they have done precisely as we recommended. We warmly welcome the move, which we regard as a sign of a responsive Government. We are grateful for that.
Secondly, we welcome the closer alignment between income tax and national insurance contributions, by merging the Contributions Agency with the Inland Revenue and aligning thresholds. We wonder whether that presages an eventual integration. I shall be interested to hear from the Paymaster General whether the Government have decided that the contributory principle has a future and that those basically direct taxes will eventually be merged. I hope for a response to that question, but I do not expect one.
The third element of the Budget that I welcome sincerely is additional money for the poorest children. I welcome very much the provision of extra money on the rates of child premiums for income support, for children under 11. It is sensible that that measure focuses on younger children who have the greatest need. However, I part company with the Chancellor on one point. He said:
The case for additional support for children in poorer families is strong, but that support should be on the basis of the identifiable needs of children, not on whether there happens to be one parent rather than two."—[Official Report, 17 March 1998; Vol. 308, c. 1107.]
The evidence is clear that one-parent families on income support are much poorer than two-parent families on income support. When measured by all the yardsticks of deprivation—such as durables, debt and all the things that affect quality of life—lone parents on income support are poorer than two-parent families on income support, and therefore require extra, rather than the same, help. We welcome additional money for all poor families on income support, but, on the Chancellor's own argument that support should be on the basis of the identified needs of children, lone parents continue to have a case for additional money.
As I said in an intervention during the Secretary of State's speech, it is regrettable that, in 1998–99, we have the anomaly that new lone parents will face the cut that was so controversial, whereas in 1999 all families with children will, essentially, get the money back.
It is a particular misfortune to become a lone parent in 1998–99 and to have to get by for a year without that £5 of family premium. It would cost the Government


relatively little, even at this stage, to defer that cut. One element of that cut is still before the other place, and I hope that the Government will take the opportunity to defer it. Then we shall really believe that they are concerned about all poor children in poor families.
I welcome much of the Budget, but there is one important omission, which is housing costs. The words "rent" and "housing costs" do not appear in the Budget. Yet an important table on page 36 of the Government's first consultation document issued last July, "The Modernisation of Britain's Tax and Benefit System", lists the aspects which, according to research commissioned by the Department of Social Security, are barriers to people leaving benefit. The cost of child care is on the list, but in sixth position. After wage worries, second and third on the list come fears about losing help with council tax and with housing costs—mortgages and rents. That has been clearly identified by DSS research as stopping people on benefit moving off benefit into work. Regrettably, there was nothing in the Budget for that cause.
The working families tax credit with extra cash will help to some extent, but as soon as a person with a mortgage of £100 a week, which is not implausible, works 16 hours a week, he will have to find all that money from his net pay, quite apart from child care and all the other costs. That is a huge disincentive, which the Government have not even shown signs of reviewing.
The Government are reviewing housing benefit, which we welcome. During the past 10 years, rents have shot up hugely more than inflation and, like mortgages, rents are a huge burden on the low-paid. I should like to see—I speak in a personal capacity—social rents, and private rents for that matter, brought down. That is a slightly old-fashioned notion, but, as most people in the local authority and social rent sector are on low incomes, cutting rents would be a well-targeted universal subsidy. Universal subsidies are not as popular as they were, but, from a welfare-to-work point of view, it is much more effective to give people lower rents and enable them to obtain work, than for them to have high rents that they cannot afford when they take jobs.
To summarise, there are many welcome things in the Budget, but one important omission is the treatment of housing costs—rents and mortgages. It is regrettable that the matter was not considered in the round. The Budget measures on welfare to work—the working families tax credit, and so on—were not integrated with housing. The minimum wage will help, as will lower starting rates of tax or a higher allowance, the tax credits and the national insurance reforms, but everything should be taken together. Let us bring in housing costs. Let us not suffer from departmentalitis, whereby, because a matter comes under another Department, it is considered separately six months later. Let us include housing and have a comprehensive response to the problems of the low-paid. I shall then be able to welcome the Budget even more whole-heartedly than I already do.

Mr. David Chaytor: I, too, welcome the Budget, particularly its emphasis on making work pay, the steps that it has taken to reform the appalling anomalies within the welfare state that we have inherited, its support for families and its new help with child care, the new

investment for public services, particularly schools and hospitals, and the various measures that will support small businesses and job creation.
Those measures will be welcomed by my constituents in Bury. For too many years, thousands of them have suffered from chronic levels of low pay, from too little full-time work and too much part-time work, and from the absence of child care. The increase in child benefit will be appreciated by the 27,000 families in my constituency, particularly as one in nine are lone-parent families.
My local authority in Bury has one of the lowest levels of per capita funding for children in primary and secondary schools of any local authority in Britain. Therefore, the new investment in schools will be particularly welcome. Equally, our hospital has one of the lowest levels of per capita funding of any hospital trust in Britain. The new money for reducing waiting lists will be significant.
The Budget is in marked contrast to the successive Budgets of the Tory years, which served simply to reinforce inequality, progressively to disfranchise more and more families and young people, and to exclude increasing numbers of people from mainstream society. I am proud that my Government, through the Budget and the new deal, are starting to rebuild hope for the next generation, whereas the previous generation saw nothing but exclusion and the progressive eradication of its opportunities.
The significant changes to national insurance, the introduction of the working families tax credit and the tax credits for child care will help to transform the lives of many of my constituents, particularly women who are struggling to combine work and child care, or women who have been excluded from the labour market for too many years simply because of the limited availability of child care.
Within my general welcome for the Budget, I wish to raise one or two specific points, which I should be grateful if my hon. Friend the Paymaster General could mention when he replies.
First, I have to agree with one or two Conservative Members about the unfortunate absence of any reference to pensioners, either in the Chancellor's speech on Tuesday or in the Budget report. We understand and welcome the important help with fuel costs that was given to pensioners before Christmas, and we know that the pensions review will be published in the first half of this year. Clearly, this is not the time to make major changes to the pension system. Nevertheless, it would have given some hope, confidence and comfort to the nation's pensioners had there been some reference to them, even a simple one to the forthcoming review, in Tuesday's speech or in the Budget report.
With regard to lone-parent families, I understand the Government's point about separating out the issue of need and the issue of family structure, saying that need, not family structure, should be the basis of public support. I have tried hard to agree with that, but I simply cannot accept that the needs of a two-earner family paying the higher rate of income tax are equal to those of a lone-parent family. I cannot believe that the difficulties of bringing up and caring for children are the same for two parents as for one. I welcome the fact that the Government have responded to the previous changes in the Social


Security Bill last December. Most lone parents will be pleased with the measures announced in the Budget, but, in line with the comments of the hon. Member for Northavon (Mr. Webb), I appeal to the Government to keep under review the question of need and lone-parent families.
Similarly, I welcome the fact that my right hon. Friend the Chancellor has flagged up the future status of child benefit in terms of taxation. But, again, I simply cannot justify that the child benefit received by two-earner families, paying the highest rate of income tax, should not be subject to tax, yet the lone-parent benefit was taken away last December. I hope that if it is finally decided that child benefit should be subject to taxation, the revenue from that taxation will be earmarked for further help for the poorest families in Britain, many of whom will be lone-parent families.
Another important technical point concerns the merger of the Inland Revenue and the Contributions Agency. That is one of the most profoundly important measures in the Budget because of the changes that it flags up to the future financing of the welfare state. I hope that there will be a lively debate on the continuation of the contributory principle under a merged bureaucracy. I also hope that, whatever happens to the contributory principle, it concentrates our collective mind on the harmonisation of tax and national insurance rates and thresholds and, in particular, flags up the enormous anomaly of the national insurance threshold. I appeal to hon. Members to ask themselves how they can justify the fact that, above £22,000—or thereabouts—a year, one stops paying national insurance? That is one of the most regressive features of our tax system, and, sooner or later, a Government will have to address it.
My major point concerns environmental taxation, about which my hon. Friends the Members for Stroud (Mr. Drew) and for Peterborough (Mrs. Brinton) have already spoken. I add my voice in support of the green tax measures in the Budget, particularly the increase in landfill tax, the cut in VAT on energy-saving materials and the various changes to road fuel duty and vehicle excise duty. Those measures are important and positive, but are comparatively limited in terms of their effect on greenhouse gases or traffic reduction.
To meet our Kyoto targets, there is scope for other measures, such as taxing employers' car parking spaces; urban road pricing; heavier taxation on dirty and fuel-inefficient vehicles, and taxing out-of-town retail parking spaces. I look forward to the forthcoming White Paper on the integrated transport strategy, which will, I am sure, deal with some of those points.
I particularly welcome the Chancellor's decision to investigate industrial and commercial energy taxation. It is critical that we carry industry and commerce with us in moving towards green taxation, and to demonstrate the value of green taxes, not only the cost savings to business, but the potential for growth in energy efficiency and environmental technologies. I look forward to other developments such as, for example, water pollution charges, following the recent Department of the Environment, Transport and the Regions consultation paper.

Not only does green taxation help to conserve the natural resources on which our future health and prosperity depend, but, in the main, green taxes are cheap and easy to collect. They are difficult to avoid and serve to legitimise the whole concept of taxation. That legitimisation is sorely needed following the disastrous record of the previous Government in encouraging tax evasion and introducing taxes that were widely considered unfair and inefficient.
Most important, as we have seen already, green taxes enable the Government to cut taxes in other areas, most notably labour and wealth creation. That is already happening under our Government. It started to happen under the previous Government, and it is happening across Europe. It needs to be extended further as part of a general policy of shifting the burden of taxation away from goods and processes that are intrinsically good and towards those that are intrinsically bad.
I welcome the achievements on green taxation so far, but there is much further to go. I draw the House's attention to two documents published recently. The report of the Environmental Audit Select Committee contains a wealth of evidence from different sources on the state of green taxation. It rehearses most of the arguments in favour of green taxation. I hope that, over the next few months, the Government will take careful note of it when framing the 1999 Budget. I urge all hon. Members who have an interest in this issue to give their support to early-day motion 1108, which relates to the—

Mr. Deputy Speaker (Mr. Michael J. Martin): Order. Time is up.

Mr. Oliver Letwin: I am profoundly grateful to be able to speak while our Whips have vanished from the scene, as—perhaps unusually for an Opposition Member—I think that some aspects of the Budget are admirable. It is an immensely tough Budget in terms of the fiscal balance that it establishes. In fact, it outdoes most Conservative Chancellors in that respect. Other aspects that should be welcomed include the general principle of transferring from one form of benefit to a tax credit.
Alas, I do not think that the welcome for the Budget can be unreserved, as the transfer of taxation to the corporate sector, which will be discussed on Monday, will, I think—only time will tell—turn out to have been grossly misjudged and will contribute to what is already a far more severe recession in the manufacturing sector than the Treasury's models recognise. Throughout the past 25 years, the Treasury's models have been notoriously inaccurate in these respects.
I shall concentrate on a matter on which my hon. Friend the Member for Chingford and Woodford Green (Mr. Duncan Smith) began to elaborate. The Budget has a most important effect—one that I very much doubt that the Government intended. I am delighted to be able to speak about this in the presence of the Paymaster General, because, presumably, he was the Minister responsible for the most welcome U-turn. I presume that he was responsible for ensuring that individual savings accounts would not involve a retrospective breach of the trust of those who had engaged in tax-exempt special savings accounts and personal equity plans. If the Government


were able to make that welcome U-turn, perhaps, under the Paymaster General's inspiration, they will be able in subsequent legislation—or even in the next few days, if one is to indulge in one's wildest dreams—to alter their position on the matter to which my hon. Friend referred.
I am speaking of something that is far more important to the children—at whom in great part, as many hon. Members on both sides of the House have referred, the Budget is aimed—than the money involved in the child care tax credit. Many issues were raised about the practicalities of the child care tax credit. The jury is out on that. We shall see what happens to mothers, to registrations, and whether it is used as a mechanism for simply increasing family income. If that happens, the predictions of the Institute for Fiscal Studies may come true, and there may be a £3 billion or £4 billion cost, as opposed to the £1 billion asserted by the Treasury.
Be that as it may, I regret to say that the child care tax credit is just a matter of money. How could I possibly say that anything is just a matter of money in relation to a Budget? This Budget intends to have—and does have—profound social effects. It is intended to create incentives, one of which I warmly welcome—the incentive for people to work. If the Chancellor were asked for his proudest achievement of the Budget, he would presumably tell us that it was to create a greater incentive to work. That admits immediately that the Budget's main point is its social effects and the effects on social incentives. If that is the case, it is not the money with which we should be most concerned but the social effect.
Anybody on the Conservative Benches has to admit that, until the last day of the previous Administration, the Conservative Government—much more out of oversight than intention—gradually tilted the balance, I regret to say, against marriage. Many of us, including my hon. Friend the Member for Chingford and Woodford Green, preached against this throughout the time of the previous Government and regret it. However, that is not a reason for the present Government to repeat and amplify the mistake that we made. Any hon. Member who has children will agree that the sad truth is that the most important thing—above money and poverty—for children is how they live in their family.
I do not wish to moralise about this. It is a dreadful error for politicians to moralise. Perhaps we on the Conservative Benches stand convicted from time to time of having moralised too much. If the Chancellor genuinely believes—I think that he does—that his Budget is intended to achieve social effects, he must believe that it is right for the tax system to be viewed from the point of view of the social effects that it is likely to have. That means that the Government have to make a conscious choice about the society that they are trying to tilt towards through the tax system. If that is the case, it is undeniable that the Budget quite specifically militates against marriage.
It is no part of my purpose to argue in religious or moral terms for the institution of marriage. My argument is a practical one. It is about children. There is ample evidence—I do not think that the Secretary of State for Social Security would deny this, as her Department has evidenced this in its own work, and the Select Committee has reiterated it over many years—that, by and large, children prosper more when marriages stick together. It has been shown over many decades that although the

divorce rate is alarmingly high, marriage is a better means of keeping parents together than any known human institution.
A Budget that starts from a series of mistakes made by a previous Government—perhaps from mistakes made over the previous 100 years—allied to social trends that have gradually undermined marriage, and that unnecessarily amplifies those mistakes for a small gain of roughly £1 billion by reducing the married allowance, and further amplifies them by making it easier for people to enter partnerships and still enjoy reasonable incomes for their children, unconsciously and unintentionally does gross damage to the structure of our society. If I am right that that is not what the Government intend, it can be easily remedied at little cost. If I am wrong, however, and that is part of the Government's intention, they should say so—and 30 million, 40 million or 50 million would howl them down.
There has been a tremendous reaction against ideas that were prevalent in the 1950s and 1960 that suggested that there was no difference between partnerships that stuck together and those that did not—hence, between partnership and marriage. That is a dated idea, because the modern view—the Labour party much prides itself on speaking about modernity—is that marriage is a glue that sticks society together, holds families together and helps children.
The Minister should admit either that the effect to which I have referred is not what the Government intended and that they will reverse it, or that it is what they intended and try to make an argument for what most hon. Members, even in this thinly populated Chamber, would find difficult to defend.

Mr. Jonathan Shaw: All hon. Members would agree that the remarks of the hon. Member for West Dorset (Mr. Letwin) about marriage and children were sincere. Having spent 10 years in social work, I agree that children prosper if families remain together. It is regrettable when parents split up because it has a detrimental effect, but for families on low incomes the pressures and strains of having insufficient resources to pay their way add to discord between couples and ultimately may lead to a marriage or relationship breaking up.
One of the positive measures in the Budget is the working families tax credit, which provides child care support for families.
I wish to focus on three areas—the main welfare to work and social security measures and two related issues. In my 10 years in community and social work, I endeavoured to assist people living in poverty and disadvantage to achieve change. Indeed, that is why I entered politics and joined the Labour party. I welcome and applaud the Budget. It provides essential solutions to tackling deprivation, and it will enhance the lives and opportunities of many people and families.
The new deal was introduced last July. Its proposals have been met with considerable enthusiasm in my constituency, especially among employers and young people. We recently launched the Medway towns new deal in the House, at which I was pleased to see the chairman of Gillingham football club. The Budget's proposals are the next crucial step after the new deal in


helping to tackle poverty. The key test for the Labour Government is to turn back the tide of poverty that has crept over the country in the past 18 years.
Being on benefit should not mean that someone must live in poverty. My hon. Friend the Member for Bury, North (Mr. Chaytor) referred to pensioners, many of whom live in poverty. That is particularly true of those who served in the war, who now have only a couple of ha'pennies to rub together. That is an indictment of us all. I was pleased to hear my right hon. Friend the Secretary of State reiterate that not everyone will be able to work and take advantage of the Budget's proposals. People with disabilities should not feel guilty about being on benefit; they should be secure in the knowledge that we value them as equals.
Being trapped on benefit is a real existence for many people, and in my previous work I saw the manifestations of that, which were eloquently described by my hon. Friend the Member for Bradford, North (Mr. Rooney). In constituencies such as mine, in which unemployment is about 5 per cent., there are pockets of unemployment where the rate is twice as high, and that has applied for far too long. As economic prospects improve for the majority, little seems to change for such people.
I recently attended a business breakfast, at which we were again launching the new deal. An employer said, "To tackle deprivation, surely all we must ensure is that the economy continues to improve." That is right, but if everyone is to benefit, especially those communities about which I am speaking, the necessary structures must be put in place, which is what the Budget aims to do.
It is not simple to get people back to work: a number of measures must be used. Shaming people and telling them to get on their bikes, which we heard many years ago, will not work. That only alienates people and defeats the desired objective.
We must also have a change of culture. It is hardly surprising that young people from the second or third generations of a family that has not experienced work have little aspiration other than the dole queue. I recently travelled to London on the train and spoke to two 18-year-olds from my area who had no expectation other than benefit. Indeed, they were surprised that I felt that they should be looking for an alternative life style. Perversely, they argued, albeit wrongly, that they were better off on benefits.
My hon. Friend the Member for Bradford, North eloquently stated that, tragically, many families are better off on benefit. The communities on the estate where those 18-year-olds live have been increasingly excluded and deprived. Many parents on such estates feel that they have not been able to offer themselves as a role model because they have been unable to work. I do not condemn them, but we must provide opportunities for parents so that as their children grow up they see that the aspiration to, and expectation of, work are the norm and do not say when they are 18, "We're better off on benefit."
The Budget's tax and benefit proposals will enormously assist low-income families and those on benefits and will effect the change in culture that I have described and provide opportunities.
The current family credit system has many faults, and there is a stigma attached to it. People have to fill in reams of paper when applying for it, and there is an

unsatisfactory take-up rate. People generally prefer not to be in receipt of welfare benefits. The Chancellor's proposals will give more cash help to 400,000 families and will break the benefits link, as the credit can be paid through a wage. That is a far more dignified way of assisting low-income families. I look forward to hearing whether it will be paid through the purse or the wallet.
Child minders and nurseries were part of my responsibilities when I worked in social services. There are many unregistered, and therefore illegal, child minders. They do not necessarily have a wanton desire to flout the law and put children at risk: they are neighbours and friends, particularly in poorer communities, who act together to support one another. There is a massive shortage of good-quality child care. The working families tax credit, coupled with the improved child benefit, will allow parents to work and will be an income and a regenerator for poorer communities, because money spent on child care will remain within those communities. I welcome the debate on who should receive child benefit and who should be taxed on it.
Another 50,000 child minders are required. That would put further pressure on local authorities' registration and inspection units.

Mr. Robert Walter: I shall take a different approach from other hon. Members, although my right hon. Friend the Member for South Norfolk (Mr. MacGregor) referred to the matter that I shall raise. The Budget is very unfriendly to those who live outside urban Britain. It is an attack on the countryside, and shows Labour's lack of understanding of rural issues and rural problems. My argument has nothing to do with country sports: it is about the people who live and work in rural Britain.
Britain's hard-hit farmers were left stunned by a Budget that offered them little or no comfort. I declare an interest as a farmer. The Budget did nothing to tackle the overall impact of the strong pound on agriculture and although the Chancellor acknowledged the problem, he did nothing to address it.
The deputy president of the National Farmers Union, Mr. Tim Bennett, said:
Agriculture continues to be one of the worst hit industries affected by the strength of sterling. It will bring little comfort to many struggling family farms whose incomes have been cut by a half on average last year.
Farmers remain seriously concerned about the strength of sterling, which is forcing up their costs and drawing in cheap imports, with catastrophic effects on market prices.
Farmers can draw little comfort from the Red Book. Under "Changes from previous plans" in the section on the public finances, it shows that spending by the Ministry of Agriculture, Fisheries and Food was down £140 million in 1997–98, and is down £50 million for 1998–99. Apart from the special circumstance in the Department for Education and Employment, they are among the largest reductions in spending plans.
Hon. Members may think that the changes to capital gains tax have little to do with farming. The retirement relief on capital gains tax is to be phased out over five years from 6 April 1999. That is bad news for anyone who is contemplating retirement from farming after April 1999, as it is for the disposal of any smaller business.


The Chancellor has chosen not to synchronise the withdrawal of retirement relief with his reductions in the rate of capital gains tax.
The proposed changes will ultimately result in people being unable to retire because they will have to use their money differently. That is contrary to intentions announced in the House by the Minister of Agriculture, who is seeking European Union support for an early-retirement scheme. He is asking Brussels for money for early retirement, yet he is allowing the Chancellor of the Exchequer to remove one of the most advantageous early-retirement schemes available to farmers. Farmers who want to retire are not helped by the increases in stamp duty. It is not only large farms that are worth £250,000 or £500,000; they and smaller farms will now be affected by the 3 per cent. rate of stamp duty.
Farming, market gardening, forestry and timber production have been excluded from the new enterprise investment scheme and from the venture capital scheme.
The Chancellor announced with some glee that he was reducing the mainstream rate of corporation tax to 20 per cent. Most farmers do not run their farms as corporate bodies. Farmers are individuals, so their businesses will not benefit from the reduction, and they will still pay the 23 per cent. rate of income tax.
Labour Members have suggested that the increase in petrol tax is in line with increases introduced by the previous Government. We have had two increases in petrol duty in just 10 months, whereas the previous Government did not increase petrol tax twice a year.
Drivers in rural areas—mothers who take their children to school and those who drive to work out of necessity rather than by choice—will suffer immediately as a result of the increase in petrol prices.
The deputy president of the NFU said:
Farmers will be heartened to hear the Chancellor acknowledge the need of rural communities—particularly with the announcement of a £50 million fund for rural transport—but they will be waiting to see that acknowledgement translated into tangible benefits.
Britain's rural parishes will have to bid for cash from this £50 million fund, which seems ridiculously small if it is to have a sensible effect. The Times suggested:
If the three quarters of rural communities without any bus service at all share Gordon Brown's promised £50 million investment in rural transport they will end up with little more than a wheel nut each.
I contend that £50 million is not much spread across the country.
Let us take a typical couple with two children and a mortgage, living in one of the shire counties of rural Britain. Such a couple will be about £1,000 worse off as a result of the measures introduced by the Government in two Budgets. There are the increases in petrol duty, which I have already mentioned; there are the increases in mortgage interest rates, which, as we know, result from high interest rates that led to a rise in the value of sterling; and, of course, there are the increases in council tax, which in my county amount to a minimum of 12 per cent. in any district year on year. That represents an 11 per cent. decline in the disposable income of the typical couple whom I have cited.
The Government have demonstrated their insensitivity to the needs of rural Britain. They have hit rural industry, especially agriculture. In the first year of the current

Administration, agriculture has become £2 billion worse off, and the Budget has done nothing to redress that. In fact, in many of our rural industries and communities, it has made the position much worse.

Mr. Nick Gibb: There is more to the Budget than meets the eye in regard to tax increases, and significantly less than meets the eye in regard to the Government's stated objectives. First, let me say something about the handwritten contract with the people that the Labour leader drafted with his very own hand during the election campaign. The first clause of that contract said that a Labour Government would spend the money that had been used to deal with the cost of economic and social failure on education. In other words, Labour would reform the welfare state, and would use the resulting savings to boost education.
Let us see how Labour is doing in that regard. At the end of February, the Minister for Welfare Reform appeared before the Select Committee on Social Security. When asked how much he expected to be saved from the social security budget during the lifetime of the current Parliament, he said that he wished
to slow the rate of increase in social security spending.
There were no plans to reduce spending, no plans to make savings and no plans to plough cash from social security into education. That was a clear breach of the first clause of Labour's so-called contract with the people.
The objective of halting the rate of increase in social security spending had already been achieved by my right hon. Friend the Member for Hitchin and Harpenden (Mr. Lilley), but it is clear from the Budget that even that objective has now been abandoned. According to the Red Book, the working families tax credit will cost £420 million more than family credit in its first six months of operation, and £1.3 billion in its first full year. On top of that there is the increased child benefit and child-care tax credit, involving a total cost of £1.2 billion a year. There will be no savings in the social security budget under the present Government. There is a breach of the first clause of the contract with the people, and there is a gaping hole in Labour's tax and spending plans.
Let us cast our minds back to the economic package that Labour presented to the electorate. Apart from the windfall tax, Labour's spending programme involved no requirement to raise taxes; all its promises of increased spending on education and health could be funded by existing budgets—through efficiencies and, most significantly, savings in the social security budget. The Labour party said—and still says—that it would reduce the dependency culture, and would get people off welfare.
Let us consider the Government's objective, which will again demonstrate that there is less in the Budget than meets the eye. The introduction of the working families tax credit is clearly well intentioned, but family credit has been a very successful benefit. There has been an 82 per cent. take-up rate on the basis of expenditure. It clearly helps not only low-income couples but single parents to go to work. We have yet to be told why family credit needed to be replaced, other than the fact that it was introduced by the Conservatives.
The problem with the working families tax credits and childcare tax credits is the enormous increase in the number of people eligible for the benefit higher up


the income scale. There has always been a big problem with changing tapering rates: as incomes rise, people begin to lose benefit. Inevitably, in any benefit system, coming off benefit will involve high withdrawal rates. The difficulty is that making withdrawal rates less steep will mean extending the tapers higher up the income scale, making more people eligible for benefit.
The purpose of lowering tapering rates is to provide more incentives to get people off benefits and into work. As a result, others are often given increased incentives to reduce work and claim benefits. That is precisely what the Government admit would be a consequence of the working families tax credit and the reduced taper of 55 per cent. The notorious table 3.3 in the Red Book points out that 250,000 more people will face withdrawal rates of 60 per cent. or more as a result of the Budget. The second objective—to reduce the dependency culture—has clearly not been met.
When the childcare tax credit is included, the increased dependency culture becomes worse. It is clear that the availability of the new benefit goes right off the income scale. A family earning £22,000 a year with one child will be able to claim the credit. That income is just above the national average. How can we reduce dependency if we give new income-related benefits to households on above-average income?
The position is worse still. A family with two children will be able to claim the benefit with an income of up to £30,000 a year, significantly higher than the average income. It is absurd to claim, as the Government do, that the benefit will cost only £1 billion a year. That figure is clearly nonsense, as even a quick glance at the examples in the separate book on the working families tax credit will show.
Example four is of a family earning £23,400, who will be able to claim £45 a week child care tax credit. That is more than £2,300 a year and most claimants will be able to receive more. Clearly, £1 billion is an underestimate. The Institute for Fiscal Studies agrees. It estimates that the cost will be some £4 billion if everyone who is entitled to the credit takes it up.
Much of the Budget is about putting right some of the many catastrophic and ill-thought-through measures in the Government's first Budget last July. The hubris with which the dynamic new Chancellor launched his July Budget has been matched only by the humiliation that the Government, and the Paymaster General in particular, have faced since that Budget. A host of new measures have been required to put matters right.
Ending the repayment of tax credits led to the abolition of foreign income dividends, which meant having to abolish advance corporation tax and to introduce a new method of paying corporation tax which, even with the changes, still places an enormous cash flow burden on British industry over the next four years. Those measures combined will cost companies £20 billion over that time—money which would otherwise have been available for investment.
Labour was elected on the clear understanding that it had no plans to increase tax. There is an abundance of quotes to prove that. Before the election, the Prime Minister said:
We have no plans to increase tax at all".

In August 1996, he told the Daily Express:
Our proposals do not involve raising taxes".
The Chancellor of the Exchequer said before the election—to the authoritative source of GMTV on 8 April 1997:
There is no black hole for the Labour Party because we have got no public spending commitments that require extra taxes".
Ministers are trying retrospectively to rewrite that commitment. They say that they promised not to raise only the basic and higher rates of income tax. Just like a dishonest salesman pointing to the fine print of a contract, they say that the British electorate should have known that they would raise taxes and that the commitment was to do just with the rates, but my understanding was that there was a commitment not to raise tax and that the specific commitment on rates underlined that more general agreement and commitment. It did not narrow that general commitment. Why would people feel safe to vote Labour, with its track record of tax and spend, if they thought that the only commitment was not to raise rates and that Labour was free to implement a range of other tax increases, which would, in the same way, reduce take-home pay and spending power?
This Budget is the Government's second tax-raising Budget. As well as enormous tax hikes on business, income tax rises accompany the erosion of the married couples allowance, and there are enormous expenditure tax rises in the cost of petrol. The Government have now outrageously promised to raise taxes on child benefit.
The Budget has increased tax, spending and the dependency culture. By doing so, it has breached Labour's commitment not to increase tax, not to increase spending and to reduce the dependency culture. The Government's honeymoon enabled them to get away with the tax hikes in their previous Budget. It will not do so this time.

Mr. Michael Fallon: I declare the interests that are recorded in the Register of Members' Interests.
For the second day running, more people have been ready to attack the Budget than the Government have been able to marshal to defend it. The real test of the Budget is not the headlines that the Government have managed to engineer this week or the hype that preceded it, but whether unemployment falls as a result.
Rebadging family benefits, relaunching child care initiatives and rejigging national insurance contributions are all meaningless unless more people are working and fewer people are claiming benefit as a result. I hope that the Paymaster General will accept that. I challenge him to produce the figures from the Treasury—the estimated falls in unemployment as a result of the Budget for the coming financial year, next year and the first full year of the working families tax credit. If he cannot produce those figures tonight, that will tell us a story. It is no use having a Budget entitled "Making Work Pay" if there is no more work in the first place. Whether or not this Budget makes work pay is highly questionable. What is certain is that it does not make more work possible.
By contrast, our Budgets did just that. A whole series of Budgets, including those in which my right hon. Friend the Member for South Norfolk (Mr. MacGregor),


the former Chief Secretary to the Treasury, played such a notable part, helped to produce more work. They gave us the best record of job creation in Europe and brought about a flourishing new and small business sector.
The Government have already reversed that trend. Right from the start they have hammered job creation. They have put on business a huge new burden of corporation tax and have levied the new windfall tax. They have attacked pension funds and discouraged long-term investment. This Budget has added yet more taxes on business.
The changes in national insurance contributions will hit high-skill companies. As my hon. Friend the Member for Runnymede and Weybridge (Mr. Hammond) elegantly said, the increases in stamp duty will damage businesses involved in commercial property or asset sales. There are other tax hits, notably on the insurance industry, and the full impact of others is only just coming to light. Next year, business will face the impact of the national minimum wage on wage differentials right up the pay scale. It will also face the first new costs of the social chapter legislation.
All that is worsened by the Government's callous disregard for the effect of the high pound on industry. Indeed, they encouraged the current level of sterling. By taxing pensions and hitting savings, the Government have fuelled consumption and brought about a two-speed economy. They would have done better to have genuinely acknowledged the pain now being felt right across British manufacturing industry. We did not hear much concern from the Chancellor on Tuesday. Indeed, in the section on risk assessment in the Red Book we find the chilling idea that, if the Government are wrong in some of their forecasts
monetary policy would probably be behind the game.
This is not a game for manufacturing industry.
I warn the Government now that the Budget will further unbalance the economy and may well push manufacturing industry into recession. If it does so, it will be a recession entirely of the Government's making. It will be the Brown recession. We have a Budget that puts up taxes, puts up the cost of business and fudges welfare reform.
I should like now to deal with some of the detailed points that have been made by hon. Members on both sides of the House. I begin with a glaring omission from the Budget statement and, indeed, from the Red Book which the hon. Member for Bury, North (Mr. Chaytor)—in an extremely elegant and well-argued speech—picked out: there is nothing in the Budget for pensioners. In the entire Red Book, only six lines are addressed to pensioners, and three of those simply repeat the announcement made in the pre-Budget report. Pensioners are the forgotten people in the Budget.
We should also not forget that pensioners use petrol, and that pensioners will be paying more in fuel tax. Pensioners pay council tax, and they will now be paying more council tax. Pensioners have been ignored in the Budget.
Pension schemes seem to have been further disregarded by the Government. The Under-Secretary of State for Social Security, the hon. Member for Southampton, Itchen (Mr. Denham) has wisely left the Chamber. He was present, last week, at a dinner at which the chairman of the Association of Actuaries said:
Significantly, employers' confidence in the stability of the pensions tax regime has been dented. I must warn the Government that further tax changes which are made without consultation will

do even greater damage to the confidence and willingness of employers to provide pension schemes—particularly small employers.
So pensioners have been damaged by the Budget.
My hon. Friend the Member for West Dorset (Mr. Letwin) touched on the savings issue, which was not simply an example of the Government bungling yet another scheme—although Ministers have had, of course, to back down on their retrospective and penal attempt to restrict to £50,000 the savings of those who have scrimped and saved for 10 years now. We can note other features of the Government's handling of the matter.
First, we have had no apology from the Government, in withdrawing that proposal, for the damage that they have done to confidence in public and national schemes.
Secondly, we still have a new lower limit. Although it is true that the limit is not £50,000, will the Paymaster General confirm that the current annual limit of £10,800, taking personal equity plans and tax-exempt special savings accounts together, will be reduced to £5,000?
Above all, we know from the bungling of the savings scheme Labour's true instinct. Labour did want to tax those who have worked hard and saved hard. Today, I should like the Paymaster General to tell the House what type of assurance he can give—on even his own individual savings account scheme—that the Government will not come back again, in a few years, to penalise exactly that type of tax-free exemption.
It is becoming apparent in the technical press that the changes to capital gains tax have not been universally welcomed. Given low inflation, many people would have been better off under indexation than they will be under the new lower rate.
Perhaps the Paymaster General will address himself to some of the problems—if I can call them that—that are emerging with his 30-day rule. The Government suggest that any capital gain will have to be made over 30 days rather than overnight. How will that apply—City advisers are asking—to married couples? What if the husband sells shares and the wife purchases them within 30 days? Will they still lose their exemption?
Will the various packages that are being mooted in the City allowing people to hedge against market movement in those 30 days be allowed or not?
I now turn to the working families tax credit, a proposal that was admirably dissected by my hon. Friend the Member for Havant (Mr. Willetts) last night. Like the Institute of Fiscal Studies, we reserve judgment on whether it will be an incentive or a disincentive. As one of my hon. Friends said, the jury is still out on that question.
Perhaps the Paymaster General will clear up the shambolic performance of the Financial Secretary last night and clarify two or three key points. First, will women have a veto? If he does nothing else tonight, I hope that the Paymaster General will answer that specific question. It is no use saying that it is a matter for the partners to elect. We want to know whether, if the man is the main earner, the woman will have a veto. If she does, will the Government help to publicise it and make it clear so that women know where they stand?

Mr. Rendel: On that point, if the woman has a veto, what will it do to her marital relations if she tries to use it?

Mr. Fallon: Absolutely. That is the tangle that the Government are getting into. It is something that we need to know.
Secondly, perhaps the Paymaster General could answer the question from my hon. Friend the Member for Grantham and Stamford (Mr. Davies). if the working families tax credit is such a good idea, why are the self-employed exempt from it? Why does it not apply to them? The Secretary of State for Social Security was asked that six hours ago and she could not answer it because the Treasury has not told her yet. That is the Muppet show to which the Department of Social Security has been reduced. Not only is the Secretary of State unable to give us the answer, but she cannot express a view on whether or not it is right to extend the tax credit to those who are self-employed.
Thirdly—and this is a trickier question so perhaps the Paymaster General will be able to get his mind around it—how will the working families tax credit be classified in terms of expenditure? Let me quote from the Red Book:
The net cost of WFTC is split between 'accounting adjustments' in GGE, and 'other receipts and accounting adjustments' in GGR…whether or not any or part of WFTC should score in the Control Total has not been decided.
Perhaps the Paymaster General can assist us on that point.
While we are on the subject of the Red Book, perhaps the Paymaster General can enlighten us on another matter. What has happened to the privatisation programme, which appears to have come to a grinding halt? Under the Conservative Government it was running at around £4 billion a year. In the current financial year, it brought in £2 billion from sales that we arranged. For 1998–99, it is forecast to raise £0 billion. We now learn from the Red Book that
The Government has not announced any specific sales for 1998–99 or subsequent years.
Is privatisation now off the agenda? What has happened to the sale of London Underground or the immediate review of the Post Office that was promised? What has happened to the "National Asset Register" that was launched in a great fanfare last November? Under the previous Government, asset sales were running at £3 billion or £4 billion a year. Why are they now forecast to come to an end?
Finally, perhaps I can turn to the much trailed code for fiscal stability. You will share my concern, Mr. Deputy Speaker, that the document entitled "Budget 98" was published the day before the Budget, and, worse still, was publicly launched in the newspapers. Let us be very clear. Only a Labour Government would need a code for fiscal stability, given the mess that we inherited in 1979. The code presented on Monday fails the test of seriousness required of any code.
The code is not in the "Budget 98" publication. There will merely be two clauses in the Finance Bill requiring the Chancellor to publish a code by next December. He has taken the power to modify the code if the Treasury requires that. The code is supposed to be binding on the Government, but they are allowed to modify it. The code will be limited to the relationship between taxation and

expenditure; it will not cap taxation. It will not and cannot stop this Government continuing to increase the overall burden of taxation.

Yvette Cooper: Does the hon. Gentleman accept that the previous Government doubled the national debt? Is that what he means by fiscal stability under the Conservatives?

Mr. Fallon: The hon. Lady knows that the national debt tends to rise in times of recession. We had it on track to descend without the additional tax increases that the Government have introduced.

Dr. Ladyman: Will the hon. Gentleman give way?

Mr. Fallon: No. I want to leave the Paymaster General plenty of time to grapple with my questions.
As we have the pleasure of the Paymaster General's company, perhaps we could subject the Budget to the Robinson test. At the Labour party conference last October, the Chancellor said:
A Labour Chancellor will not permit tax reliefs to millionaires in offshore tax havens.
There was not much about offshore trusts in the July Budget. There is not much about them in the Red Book. We did not hear a great deal about them on Tuesday.
Back in December, in an article that described him as a "deeply hurt Robinson", the Paymaster General said:
Indeed, I could show you internal Treasury documents to show that I have been working against my own financial interests on this policy. You will be pleasantly surprised.
We doubted it then and we certainly doubt it now. The only changes proposed to offshore trusts affect those set up before March 1991 and those to be set up by non-domiciled settlers. Will the Paymaster General confirm that, after the changes, he will still be entitled to tax-free income from the dividends on the shares that are held offshore in a trust on his behalf? The man who wanted to cap everybody else's tax-free savings at £50,000 and who is now to limit them to £5,000 a year will still be entitled to keep his millions offshore, tax free.
The Budget fails the Robinson test. Indeed, it fails every test. It puts taxes up; it pushes industry further into recession; and it postpones serious welfare reform in a muddle of rebadging, brochures and public relations. The Budget fails the country and the Government in the intentions that they set before the electorate. For those reasons, we shall oppose it on Monday night.

The Paymaster General(Mr. Geoffrey Robinson): One point on which I can respond positively to the hon. Member for Sevenoaks (Mr. Fallon) is that the ultimate test of this and all our Budgets—and all the measures that we intend progressively to introduce in a great programme of reform that Conservatives signally failed to undertake during their 18 years in office—will be the management of the economy and the stability that we are setting out to achieve. I therefore say right at the beginning of this winding-up speech that everything we have done since we took office in May has been done with achieving that stability in mind, very precisely to avoid all the errors of previous Governments—both Labour and Tory—that took


the economy and the country through the inevitable cycle of stop-go and all that meant to individuals and companies caught up in it.
Such a cycle is the most damaging thing for small companies, to which many Conservative Members have paid tribute. It is the most damaging thing for families. It is the most damaging thing to the economy of the nation. That is why, on the very day we took office, the Bank of England was granted operational independence. That is why we set in hand a series of changes that, so far from being piecemeal, were successive parts of an overall plan to take the emphasis away from paying dividends in the corporate sector to investment and long-termism. That is why we abolished tax credits.
That is why the second, logically following Budget—unlike what the hon. Member for Bognor Regis and Littlehampton (Mr. Gibb) seems to think, the Budget was part of an overall plan—neatly dovetailed to accommodate what practically can be done. I shall come to some of the practical problems in which Conservative Members are seeking refuge. As they realise that the principles of reform, progressive reorganisation and welfare and the incentives to work are things with which they must agree, they seek to take refuge in a series of pettifogging details that we shall have plenty of time to sort out over the next 18 months before the changes are introduced.
In the context of long-termism, we turn to savings. We know the Conservative party's appalling record through the 1980s, when the country had the misfortune to have it in office. We had a negative saving ratio for five years on the trot in the mid to late 1980s.

Mr. Ruffley: What about what is in the Red Book?

Mr. Robinson: There is a long way to go before it becomes negative. The hon. Gentleman must realise that the forecasts are there, they are Conservative forecasts and they are in the Red Book. I am very well aware of them. Has he the slightest idea of the difference between the projection and the negative rate that the Conservative Government achieved for five successive years in the 1980s? They are not at all comparable.
Let us talk about the individual savings accounts programme and what has been said about it. The new savings plan has been widely welcomed by every product-producing institution in the City of London. It has been welcomed by the Association of British Travel Agents, by Marks and Spencer and by areas of the retail industry that are intending to introduce the cash ISA to reach the half of the population that did not save at all and was untouched by the Conservative Government's PEPs and TESSAs.
Conservatives complain when we publish a document on which we have decided to consult; the next moment they say that the results of consultation are not what they expected. We know what consultation meant when they were in government: it meant that they had made their minds up, would not listen to reason and would not respond to the points that were put to them. That, of course, is why in the end they suffered ignominious defeat at the hands of the electorate in May. We have listened; we are a Government who consult. That surely is another factor that emerges from the way in which we are approaching the whole budgetary process.
Let us take, for example, the industrial energy arrangements on which Sir Colin Marshall has agreed to lead an investigation for the Government. We have not rushed in with detailed, absolute proposals. On the contrary, we are proposing to consult and to listen to what is said in that consultation process. So it was with ISAs.

Mr. Hammond: Does the hon. Gentleman accept that the confusion and uncertainty over the future of PEPs, TESSAs and ISAs has permanently damaged the saving ethic of the middle classes?

Mr. Robinson: That is the most ridiculous thing that has been said from the Conservative Benches all evening. The savings plan has been welcomed; we are confident that it will be a great success. I have had nothing but a welcome for the new proposals and a determination to see them fully taken up.
The hon. Member for Sevenoaks asked what we can say about the proposals for the new ISA in respect of the amounts and the duration of the tax relief arrangements. I can give him an assurance of the sort that has not been given by a Government before. He knows that it was an open secret in financial circles that the Tories themselves were planning a cap on the exponential growth of both TESSAs and PEPs, especially PEPs.
We are the first Government to have given a commitment covering 10 years, and that commitment puts in place the certainty that the savings community needs. Yes, we shall review the arrangements after seven years, but the commitment to 10 years is absolute. Yes, those savings will continue to enjoy at least the present levels of tax relief. Again, this is the first time that any Government have given that undertaking, and we do it precisely to avoid the sort of uncertainty that underlay PEPs and TESSAs. Conservative Members know that that is true.
Yes, we have said that the amounts that we envisage for the 10 years will remain as they are, and will not be reduced, although they may be reviewed. We have made that clear. Indeed, in the latter stages of the consultation—[Interruption.] They will not be reduced. If the right hon. Member for Wells (Mr. Heathcoat-Amory) does not understand what I am saying, I am sorry for him. It is a bit late in the evening, and we understand.
In the consultation period, it was put to us that to get the cash element of the new ISA, which was so important to us, off the ground, an increase in the first year, directed towards that cash element, would be welcome. We therefore made an increase for the first year—from £5,000 to £7,000—in the latter stages of the consultation, and it has all been extremely well received.
The hon. Member for Sevenoaks asked what we were doing about privatisation. I can tell him this: we shall not have any more of the rip-offs that the Conservative party allowed and we shall not have any more fat-cat millionaires—[HON. MEMBERS: "Like you."] We shall not. As Conservative Members have understood, the whole capital gains tax structure is geared towards those who undertake to make their business assets work hard to increase their capital gain. That is precisely the aim.

Mr. Gerald Howarth: Will the hon. Gentleman give way?

Mr. Robinson: I shall—not that the hon. Gentleman has been heard much in the debate, but as it is him, I shall give way in a moment.
There will be a statement tomorrow on the London underground and I advise hon. Members to attend. It will be most instructive for them to see what progress we are making, especially in avoiding the sort of traps that the Conservatives fell into. The hon. Member for Sevenoaks should take note of the arrangements that my right hon. Friend the Deputy Prime Minister will unveil.
A review of the Post Office, too, will shortly be announced, and the hon. Gentleman will see that we are also making progress there—progress on a balanced set of relationships between the public and the private, which avoids the Conservatives' mistakes.

Mr. Howarth: I am grateful to the Paymaster General for giving way to me, despite the fact that I have not been able to participate in the debate as much as I would have liked. He will not be allowed to get away with the assertion that the taxpayer did not get due value for money out of rail privatisation. The assets did not achieve a better market value because investors were put off by the Labour party's threats to take the assets back into national ownership.

Mr. Robinson: The hon. Gentleman will probably regret that intervention on reflection, but I am pleased that he made it because it enables me to clarify one point of distinction about rail privatisation that is worth making. I think that the Conservatives, slow and painful though the process was, came to learn the error of their ways in some respects, and their treatment of Railtrack avoided some of the worst aspects of their earlier privatisations. However, that did not stop the Tory Government making a hopeless mess of the rolling stock companies. Because of the definition that we used, ROSCOs were not drawn into the windfall tax, but there is every reason for thinking that they should have been. Even the hon. Member for Aldershot (Mr. Howarth) cannot feel terribly proud of them, even on commercial terms, let alone in terms of the national interest.
We are pressed for time and I shall make progress as quickly as I can. The hon. Member for Sevenoaks said that there was nothing in the Red Book about the code for fiscal stability, which is an important element in our approach to the economy. Our approach is totally different from that of the Conservatives; it is long term and principled, unlike the short-termism that characterised the Conservative Government.
That short-termism led to our taking office with accelerating interest rates, because action was not taken—

Mr. Duncan Smith: What?

Mr. Robinson: Absolutely. Where has the hon. Gentleman been for the past four years? He must have been living somewhere else. It is an acknowledged fact that the previous Chancellor of the Exchequer refused, for purely electoral, party political reasons, to increase interest rates when he should have done, and that inflation

was accelerating, which is why, on our second or third day in government, my right hon. Friend the Chancellor had to take steps.

Mr. Fallon: Will the Paymaster General give way?

Mr. David Heathcoat-Amory: Will the Paymaster General give way?

Mr. Robinson: I shall be delighted to give way in a moment. I should point out to Opposition Members—as they fight each other to clamber to the Dispatch Box—that the code for fiscal stability was published in November. If it escaped the attention of the hon. Member for Sevenoaks—who probably did not hold his present position on the Opposition Front Bench then—I shall arrange for him to receive a copy.

Mr. Fallon: If the Paymaster General is now happy with the level of interest rates, is he equally happy with the high value of sterling?

Mr. Robinson: The hon. Gentleman raises a fundamental question. Conservative Members may not like it, but they must realise that they got into a mess and produced the two biggest recessions in this country's economic management since the war. We have to go for stability—stability is vital to big and small businesses. Our exporters are having a tough time, but other countries have come through these periods. If we were to give in to short-term pressures at this stage—when we could go for long-term sustained stability and growth—we would be making precisely the same mistake as the Tories. [Interruption.]

Mr. Deputy Speaker: Order. The hon. Member for Bury St. Edmunds (Mr. Ruffley) must behave himself.

Mr. Robinson: I am grateful for your help, Mr. Deputy Speaker, although I have to say that I had not noticed the hon. Gentleman misbehaving. He was probably behaving normally.

Mr. Fallon: Will the Paymaster General give way?

Mr. Robinson: The hon. Gentleman must sit down. I have answered his question. If he does not understand it by now, he never will, and he is in for a long period of having to learn about economic management. The sooner he learns—for his own sake—the better. The Government are committed to a long-term stable economy that will avoid the stop-go policies that damaged so many businesses, put so many people into negative equity and broke so many hearts. Shadow spokesmen must learn; there is no short cut on this, and we intend to see it through.
Many right hon. and hon. Members have taken part in what has been a good debate. On the whole, it has been well attended. That is still the case. There has been a tendency for Conservative Members—with one notable exception—to say that the problem is that the detail of the administrative arrangements has yet to be put in place. The hon. Member for Chingford and Woodford Green (Mr. Duncan Smith) made a series of points on that matter and would not pretend to offer him a detailed answer


tonight. If he reflects, he will agree that a major change of this kind is bound to impose a great strain on the administration of the affairs to which it relates. We cannot pretend that it will not cause problems, but the question each of us must answer is whether the reforms are principled and going in the right direction. Are they intended to get many people out of dependency and into work? Should they provide that incentive?
The Budget is essentially about children, mothers and families, and the hon. Member for West Dorset (Mr. Letwin) made a remarkable speech in that context. The family credit system was worked through a number of great teething difficulties and if our priorities and principles are right, the same will occur with these reforms. The support that we can expect from both sides of the House will be welcome.
The hon. Member for West Dorset spoke in the absence of Whips—they are present now. He was right to have the courage to say that he welcomed the Budget. He said that it was going in the right direction and that it was based on correct principles, even though he had doubts as to whether, in a certain respect—essentially the question of married couples and the institution of marriage—we had got it wrong. We thought about that long and hard. If circumstances have changed in a way he does not approve of, I understand, but Governments must deal with the reality of any given situation, and it was against that background that we took our decision.
My hon. Friends the Members for Bradford, North (Mr. Rooney) and for Chatham and Aylesford (Mr. Shaw) have detailed personal experience of the problems associated with the less well-off in society. My hon. Friend the Member for Bradford, North instanced the perverse effects of the Conservative reforms on school meals and on child care. My hon. Friend the Member for Chatham and Aylesford spoke about two 18-year-olds whom he met on a train, both of whom had come to the conclusion that work did not make any sense for them and that they were better off on benefits. If that is the attitude—I think that that culture has been inculcated among far too many youngsters and the less well off—it is clear that we must do something about it.
To that end, we are proposing, as hon. Members on both sides of the House know, to introduce the working families tax credit, which is, I think, largely the reason for the fairly positive endorsement of the Budget by Liberal Democrats. The hon. Member for Newbury (Mr. Rendel), who speaks for the Liberal party on these matters, made a good contribution.
We also heard from the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood), who speaks with the authority of the chairmanship of the Social Security Committee. We pay tribute to that Committee's work and I take this opportunity to thank Martin Taylor for the excellent service that he rendered the House in writing the initial report. The hon. Member for Northavon (Mr. Webb) posed particular questions to which I shall ensure he receives answers—as I shall for all hon. Members who have raised points of detail on which they would like us to reply.
The Liberal Democrat attitude shows both an attention to detail and a breadth of view. That was demonstrated when the hon. Member for Newbury said that he was particularly pleased that the personal allowance would be granted to women who are caring for disabled husbands.

That change did not attract much attention, but it exemplifies the Budget's bias in favour of children, women and families, which marks a wholly new departure in social welfare reform as we move from a dependency culture to a system under which people are paid to work. People who want to work will have that opportunity and we want to ensure that the motivation for that is properly rewarded.

Mr. Ruffley: Conservative Members have consistently asked about the wallet versus purse argument in respect of working families tax credit, which is a big issue for many of our constituents. What is the Government's response to the basic criticism of their proposal?

Mr. Robinson: As the Conservative party continued to make child benefit payable to the mother, it clearly endorsed the policy that we have embedded into every measure that the Chancellor unveiled on Tuesday—we want the maximum amount to go to the children, who are at the centre, through the mother, so that families benefit. I can assure the hon. Gentleman that when we go into the details of how the tax credit will work and how we can achieve our objectives, that will be absolutely at the forefront of our concern. [Interruption.] Time is pressing, and the points made by a number of other hon. Members need replies—if I can find time, despite the sedentary interjections of the hon. Member for Chingford and Woodford Green, I shall be pleased to answer them.
I entirely agree with what the hon. Member for Beckenham (Mrs. Lait) said about deregulation. I ask her to reflect on the thought that what she proposed might entail much paperwork, as I fear is often the case at the centre of Government. Deregulation units do not always achieve exactly what they set out to do.

Mrs. Lait: Will the hon. Gentleman give way?

Mr. Robinson: I really cannot—it is too late now. No doubt there will be other occasions on which we can discuss the matter, as well as the hon. Lady's personal experience in the exponentially growing business of smuggling—hers is a particular sphere of experience, but it was interesting to hear about.
In the last moments of this debate, I must mention the speeches of my hon. Friends the Members for Bolton, West (Ms Kelly), for Colne Valley (Kali Mountford) and for Pontefract and Castleford (Yvette Cooper)—all new Labour women Members of Parliament who paid tribute to the fact that we have got this about right. Indeed, I think that my hon. Friend the Member for Pontefract and Castleford said that the Budget would benefit women five times more than men. I am not sure whether that appears in our briefing, but if not, well done; I am pleased to use the statistic in my contribution to the debate.
We inherited a situation caused by the Conservatives, who doubled the national debt. We were in a cyclical deficit and a structural deficit and had accelerating interest rates—all because of their failure to act. In the interim, we have acted. We have set in place an economic and social reform framework that will stand this country in good stead and I commend it to the House.

It being Ten o'clock, the debate stood adjourned.

Debate to be resumed tomorrow.

Orders of the Day — Prison Health Service

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Pope.]

10 pm

Helen Jones: I am grateful to have the opportunity in this short Adjournment debate to raise the problems of the prison health service. I recognise that it is not a popular subject for debate and would not be so even if it were not held at 10 o'clock on a Thursday evening. Prisoners are not a favourite cause, and their welfare is not at the forefront of most people's minds. However, the strength of the House can be measured by the way in which it deals with unpopular subjects. Similarly, the health of our society can be gauged by the way in which it deals with those who have offended against its laws.
For that reason, my first premise is that we ought to expect for prisoners the same standards of health care that we expect for ourselves. Their punishment is to serve their sentence. They have not been sentenced to be deprived of adequate health care. Yet it is clear that the present system that operates within our prisons fails to deliver the standard of care that we ought to expect and is fatally flawed. That is recognised by prisoners and by many of the staff who work in the service, and it was recognised most of all by the chief inspector of prisons in his report, "Patient or Prisoner", which was published in 1996. That report ought to be commended not only to hon. Members, but to anyone interested in the Prison Service. I am sure that my hon. Friend the Minister of State will be looking into its conclusions carefully and considering how to take them forward.
From that document and from every other source, it is clear that the prison health service fails on three counts. It fails to provide proper health care for prisoners and an adequate career path for staff, and it also fails to meet the needs of society.
The two major problems that we have to deal with in our prisons are addictive behaviour and mental health. If a prisoner goes into prison addicted to drugs and comes out addicted or goes in with mental health problems that are not dealt with in prison, that prisoner is much more likely to reoffend, and we must bear that in mind.
Instead, we should be creating a system that ensures that those problems do not occur, as far as possible, and are tackled in prison. We must also ensure that staff working in the system—we have to admit that they are working in difficult and sometimes dangerous conditions—are adequately trained and properly managed. While the dedication of many of those staff is not at issue, the real problem with the prison health service is that it lacks proper central direction and is not clear about its aims and objectives.
In some areas, we have no idea what is happening. In a written answer, the Minister said:
The aims and objectives of the prison health care service are set out in centrally published Health Care Standards".
That is right and commendable, but the answer goes on to say that, while many institutions observe those standards,
statistics are not available centrally about the proportion that do this."—[Official Report, 20 January 1998; Vol. 304, c. 518.]
Responsibility for health care in prisons is left to the governor, who is not obliged to follow any particular model of care. No patients charter is applicable in prison

to ensure minimum standards. I do not seek to apportion blame for the situation. To be honest, the system has persisted regardless of which party has been in power.
The Prison Service and the national health service have established a joint working group to consider the way forward in prison health care, but it is amazing that we cannot even say which establishments follow the central aims of the Prison Service in that regard.
Another cause for concern is the lack of suitably qualified staff in our prisons. I learned from a written answer in November that there were 14 prison establishments with vacancies for either full-time or part-time medical officers. That is bad enough in itself, but the situation regarding the qualifications of staff in our prisons and the training that they are offered is even worse.
As anyone who has ever visited a health care centre in a prison knows, the staff work with very difficult patients who are demanding and can be violent, so it is essential that they have adequate training and are properly managed, yet medical officers get only a two-week induction course in prison health care, and many prisons still do not have health care managers as recommended in the chief inspector's report.
Data are not collected centrally, but the Minister told me in a written answer that
data from 122 establishments indicate that…34 per cent. of health care managers"—[Official Report, 13 November 1997; Vol. 300, c. 653.]
are registered nurses. We do not know how many nurses or other health care staff are undertaking national vocational qualifications or other courses in health care management. I fail to see how the prison health service can function properly with a lack of NHS-trained managers. The fact that we do not even have adequate data is extremely worrying.
The lack of qualified staff to deal with mental health care and addiction is apparent. Because mental health problems are so widespread, it is important to have staff who can cope with them; yet of 197 doctors employed in the Prison Service, only 21 are members of the Royal College of Psychiatrists or hold a diploma in psychiatric medicine.
The training of other staff in dealing with mentally disordered offenders is very patchy, and only 21 per cent. of all health care officers and nursing grades employed in prisons are registered mental nurses. Under those conditions, the service cannot be expected to cope with the number of prisoners with mental health problems.
There are further grounds for concern about how we deal with mentally disordered offenders. The Mental Health Act 1983 does not apply in prisons, so the code of practice on seclusion does not apply either. The guidelines are issued for guidance to prison doctors, but they are not bound by them. I suggest that that is yet another example of the standards of health care that we expect outside prisons not applying within them.
There is also a real problem with the transfer of prisoners to psychiatric institutions. It is true that, once the warrant is issued, those transfers take place very quickly. However, I have talked to prison staff who have made it clear that it sometimes takes a long time to reach that stage. It is often difficult to get doctors to assess prisoners and find proper placements for them. At one time,


the Prison Service estimated that 2,000 prisoners should be transferred to NHS psychiatric care, but could find places for only about 700. The situation was so bad that the chief inspector recommended the establishment of new units for day care centres and 24-hour nursing. However, there has been little progress towards those objectives.
We all recognise that there is a widespread problem with drug abuse in our prisons, yet only 25 per cent. of doctors who work in prisons are trained to deal with addictive behaviour. While I welcome the research carried out in our prisons into drug treatment programmes and the assessments of the impact of mandatory drug testing on the patterns of drug abuse, much remains to be done. Risley in my constituency is in the process of establishing a drugs treatment centre. The officers involved in that project are very enthusiastic about it. They recognise that, while prisoners are rightly punished for drug use in prison, we are not tackling the real problem unless we do something to break the cycle of drug dependency.
Unfortunately, initiatives such as that are few and far between. The same is true in other areas of prison life. For instance, it is clear from the chief inspector's report that care for young offenders is very patchy. There are also serious problems with the care of pregnant women in prison. The Royal College of Midwives' guidelines for prisoners, on pregnancy and childbirth, have yet to be implemented in many establishments.
A further concern is general health promotion and health education in prisons. Some basic awareness training in the area of HIV and AIDS is provided—usually in the first weeks of imprisonment—but much more must be done to educate prisoners about healthy life style choices, treatment and how to prevent ill health. I was heartened to meet recently some nurses from Winchester and to hear what they are doing. They are working in a wing of the prison rather than in a health care centre, so that they are available for appointments with prisoners and can answer questions about any aspect of health care.
Such initiatives point the way forward. However, the real problem with the current system is that it depends on individual staff and governors to take action. We need consistency and co-operation throughout the service, so that standards can be improved and best practice can spread. That is what we are trying to achieve in the national health service, and we should try to achieve it in prisons as well.
I accept that the problems facing the prison health service cannot be put right overnight. However, we must face the fact that health care for prisoners is below the standard of that received by the ordinary population, in terms of both quality of care and access to services. The question is how we should move forward. We must recognise that recruiting more qualified staff is the key to progress. As things stand, there is little incentive for doctors or nurses to work in prisons. There is no real career path, and there are fewer promotion prospects than there are outside.
We also have to be honest and say that prison staff face real ethical dilemmas concerning privacy, confidentiality and the exercise of their clinical judgment; and whether they might appear in conflict with the prison authority.
There is no continuity of planning between the NHS and the Prison Service, and there are no common standards for health care. That is why it is vital in the long

term that the prison health service is integrated into the NHS. Such a move would have major benefits for the quality of patient care and for the training and professional development of staff.
I also recognise that that is not so easy to achieve. Major resource implications should be recognised. The prison population is a significantly higher user of the health service than people of the equivalent age and sex elsewhere. In addition, as I hope I have pointed out, prisoners have hidden health care needs that are not being met and which will increase costs.
It is clear, too, that other issues will have to be tackled, such as the lines of managerial accountability and the relationship between primary and specialist care, which is probably needed more in prisons than outside.
In that situation, it is not easy to move forward, but I hope that the Government will accept that doing nothing is not an option. I hope that when my hon. Friend the Minister of State replies, she will consider some of the ways in which we could progress. If we cannot arrive at the point that we would wish immediately, I hope that the Government will at least consider some pilot projects from which we could learn, and move on from there.
There are many possibilities. For example, prisons could be linked with local trusts. We could consider linking prisons with psychiatric care outside, perhaps a regional secure unit. Such a system might provide easier transfers and better opportunities for research and staff development.
But whatever we do, we must ensure that qualified staff are attracted into our prisons and that we tackle the major health care problems. There are opportunities as well as problems. For example, there are opportunities to consider multi-disciplinary health care within our prisons, involving nurses much more in health care.
If we do not do something, the service will continue to fail to meet the needs of those in prison and of society. I hope that, in the end, we shall be able to tackle the problem. It is not an easy one and it is not a popular cause, but it must be tackled urgently. I hope that my hon. Friend will suggest some ways in which we might go forward and tell us her thinking on these issues.

The Minister of State, Home Office (Ms Joyce Quin): I congratulate my hon. Friend the Member for Warrington, North (Helen Jones) on her good fortune in securing this Adjournment debate and on her choice of subject. I welcome the opportunity to speak to the House on the subject of the prison health care service and how the Government see its future.
My hon. Friend has taken an active interest in the matter during the past year, particularly through her various written questions on the subject, which I welcome. It is an important subject, in which many hon. Members have a keen interest.
The Prison Service, in its statement of purpose, has the duty of imprisoning those sent to prison by the courts, and also owes a duty of care to the people in its custody. It must also prepare them for release.
I was glad that my hon. Friend recognised that the provision of health care is an important dimension of that duty. However, I do not want the House to be under any illusions about the difficulties involved in that task, or the challenges that it presents to staff.
Perhaps I could give some statistics as a background. In the last financial year, 1996–97, about 200,000 prisoners passed through the prison system. The average daily population rose from 53,740 at the end of March 1996 to 59,161 at the end of March 1997. The most recent figure is slightly over 65,000. During that period, the prison health care service handled more than 2 million health-related consultations with inmates. Around 190,000 of these were with visiting NHS consultants providing treatment and care in a variety of specialisms: psychiatry, dentistry, optometry, radiography, and so on.
On 37,000 occasions, prisoners were sent to NHS hospitals as out-patients or in-patients. That represents a good deal of work. Prisons are closed and secure institutions, and, as my hon. Friend recognised, many of the things that are simple and straightforward in the community take on a more complicated character in prison.
My hon. Friend also recognised that, as a group, prisoners are not typical of the general population. That is perhaps obvious, but it is particularly true in health terms. The prison population is predominantly young and male, with a higher incidence of mental disorder and a higher propensity to suicide. They are more likely to smoke—80 per cent. of prisoners do—and to have a drug-taking habit.
By contrast, the equivalent male age group in the community at large tends to make comparatively few demands on health services. All these factors, coupled with the facts and necessary consequences of custody—security, control of medication, particular care for the vulnerable, depressed or suicidal and mentally disordered—make providing health care in prisons a challenge both to health care professionals and to uniformed staff.
An Institute of Psychiatry survey showed that around 38 per cent. of sentenced prisoners suffer some form of mental disorder, although it is important to recognise that, within that figure, we also include those who have some degree of substance misuse or addiction.
A similar survey completed in 1993–94 found that the incidence of mental disorder in the remand population was much higher, at around 66 per cent. In terms of the current population, that translates to around 20,000 sentenced prisoners and 8,300 remand prisoners having some kind of mental disorder: psychosis, neurosis, personality disorder, substance misuse or addiction.
I am glad that random mandatory drug testing appears to be having an impact on drug misuse. The figures available for this year show that 21 per cent. of tests are proving positive—against 24 per cent. last year. The great majority of positive results are for cannabis, but 4 per cent. prove positive for opiates. The fact remains that some prisoners continue to take part in risky behaviour—taking drugs and sharing needles.
We are in the relatively fortunate position that the human immune deficiency virus is not prevalent in our prisons, but we know from experience in other countries that prisons could readily become reservoirs of communicable diseases—HIV, hepatitis B and C, tuberculosis and others. Therefore, we cannot afford to be complacent. Unless care and precautions are taken,

there is potential for a serious threat to prisoners' health, the health of their families, prison staff and, ultimately, the wider community.
Improving the effectiveness of the health care that prisoners receive makes obvious sense: a large number of prisoners spend relatively short periods in custody, during which time effective health care and the prevention of disease can make a positive impact when they return to their home community.
I should underline that good work is being done in response to those challenges. In my visits to various prisons, I have seen the commitment and dedication of prison staff and those who provide health care in prisons. Indeed, they have managed well against the pressures of a rising population, which makes special demands. None the less, many tasks are being taken forward, and there are plans for the future. I hope that I shall be able to refer to these briefly.
The Prison Service is pressing forward with work to develop prisons as places where the promotion of health measures as well as treatment of health problems can take place so that we can encourage prisoners to adopt healthier life styles. An internal awards scheme, which was run for the first time last year, has shown early positive results, with 20 prisons receiving some form of commendation.
A range of pilot drug treatment and counselling programmes has begun. About £6 million was spent in centrally funded projects in the current year, and about as much again was spent by prisons from local budgets. My hon. Friend referred to that work, and the Government want to increase the number of voluntary testing units, at which people in our prisons can live and be supported in a drug-free environment. About 4,000 places are currently available, and the Under-Secretary and I have visited operational schemes.
Plans are in hand to increase the number of therapeutic community places, similar to those available at Grendon prison, which my right hon. Friend the Home Secretary and I visited recently. A range of research suggests that Grendon-type therapy courses have beneficial effects in terms of psychological change and reoffending behaviour.
The number of prisoners transferred to NHS hospitals for in-patient treatment for mental disorder has increased significantly in the 1990s. It is difficult to cope with demand; there has been a fivefold increase in transfers since 1986. The NHS is playing its part in expanding facilities—a growing number of services in prison are provided by NHS specialists.
A range of training is in place or being developed to improve the skills and knowledge of health care staff and prison doctors. I agree with my hon. Friend that the central collection of statistics could be strengthened to make the position clearer, and the Government are keen to address the patchiness and variability of provision.
Training in dealing with communicable diseases is being stepped up, and prisons are required to have multidisciplinary teams to manage HIV and AIDS treatment. Their training is being extended to other communicable diseases. I have visited good induction schemes for prisoners in which HIV and AIDS awareness plays an important part. The schemes are imaginatively delivered in some prisons via video programmes, which effectively communicate the message to prisoners.


Historically, health care in prison has been the responsibility of the Prison Service, and has been organised outside the NHS. Ultimately, accountability rests with the Home Secretary, alongside that for prisons and the management of prisoners. In practice, as statistics show, the NHS has been drawn into providing some health care, particularly of a specialist nature. Indeed, the pattern of provision is quite varied. The majority of primary care is provided by directly employed staff, but, increasingly, NHS or private sector health care providers play a complementary role.
The pattern of organisation and provision reflects in part an attempt by prisons to meet local needs, but is also in large measure the result of history, and inadequately co-ordinated development. There are good examples, which might serve as models that could be applied more generally, but also rather poor ones.
My hon. Friend referred to the thematic review undertaken by the chief inspector of prisons, Sir David Ramsbotham, who highlighted his anxieties about prison health care in the report, "Patient or Prisoner?" He recommended that responsibility and, ultimately, the budget for the delivery of prisoner health care should move to the NHS. We have not yet reached a view about

whether that is the right way forward—it would raise a range of organisation, management and resource issues for the Prison Service and the NHS—but the working group to which my hon. Friend referred, involving the Home Office, the Prison Service and the Department of Health, is important in that respect. I have received an interim briefing from it, and look forward to receiving its recommendations in the near future.
The group's remit is to consider jointly the future organisation and delivery of health care to prisoners. The objectives are to secure improvements in meeting the health needs of prisoners, to tackle the problems and weaknesses in standards, and to deal with the isolation of health care staff. I agree with my hon. Friend that prison health care staff must feel part of a career structure, and must not be isolated from other health care providers and professionals. Prison health responsibility should be seen not as a career cul-de-sac, but as an important part of career development.

The motion having been made at Ten o'clock, and the debate having continued for half an hour, MR. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at half-past Ten o'clock.